Sears FINAL Earnings Call Rehearsal – SECRET TRANSCRIPTS LEAKED
On Tuesday May 22, 2018, Sears will have their usual quarterly earnings call – but there will be nothing “usual” about this one – it will be the FINAL EARNINGS CALL for this storied 125-year-old American icon.
Within publicly-traded firms, there is a well-worn practice of rehearsing earnings calls internally to ensure the right tone and brand messaging are communicated during the official event. With Sears acting Communications Director still recovering from the 2012 Swine Flu, I was invited to participate in this role-playing rehearsal at the last minute, and reprise my role as “Earnings Analyst” for this drill. The following bombshell details the uncut, unedited, and uncensored secretly-recorded transcript from our dry run. Primary participants were longtime CEO Eddie Lampert, along with their CFO, CMO, the Board, and a 24-year-old intern named Claire. Light refreshments were served.
Transcript Begins Here
Eddie: Claire, can you grab me another one of them “Firewaters” from the commissary? It’s down just past the shark tank on the left.
Eddie: First off, thank you all for attending the quarterly rehearsal of our “earnings call” (uses air quotes) – sorry, I still can’t say “earnings call” with a straight face anymore! (Room breaks up laughing).
Eddie: Since this is obviously our last call, I decided to mix things up and have our acting Earnings Analyst ask questions and we’ll respond – so go ahead.
Analyst: In a recent article entitled, “The Reports of Sears Death are NOT Greatly Exaggerated” the author Jesse Cash noted, and I quote, “In looking at the Balance Sheet and the Income Statement, I literally could not find a positive item to discuss. If a person were to create horrible statements on purpose (say for a college business class) these would be them. Everything about the financials is truly horrid. To begin with the Revenues are falling every year. Earnings? What earnings?” So, IS Sears in a death spiral?
Eddie: Fake News – it’s all Fake News. Even the author’s name Jesse Cash sounds made up. Next question.
Analyst: S&P Global Ratings just lowered Sears Holdings from a CCC+ to a CCC corporate credit rating, a cut which puts Sears three notches into "speculative grade" – and FIVE notches below Radio Shack. What’s your strategy for turning this failing enterprise around?
Eddie: Well, call me Old School, but from where I’m from, getting a “C” is still considered a Passing Grade, so technically we’re not failing. And secondly, from what I’ve seen, Radio Shack is CRUSHING IT – I mean, when you need your cassette player repaired, where you gonna go? Circuit City? Woolworths?
Board: Huzzah!
Eddie: As far as the future – the future looks GREAT! After extensive market research, we’ve determined that people LOVE….. Chipotle. So, for Q3, we've decided to set up small 10 x 10 Sears kiosks in every Chipotle store coast to coast.
Claire: They'll never go for that.
Lampert: Ok, then - we'll set up kiosks JUST OUTSIDE every Chipotle..... and stock the basics… you know – like stoves, off-brand vacuum cleaners, barrels, stuff like that...
CMO: I saw on Facebook today that we’re supposed to have a really cold winter next year. I say we buy up all the hand knit sweater vests we can find and corner the market. I can get this done for only $1 billion. We’re going to make BILLLIONS on this!
Eddie: You know I've been thinking (gazes off into space). We've been selling junk clothes, and junk appliances, and junk sports equipment for years, so how about we consider junk bonds more of a “branding” maneuver than a financial gambit, okay?
Board: Dilly Dilly!
Analyst: You’ve been accused of “financial engineering” and using “every trick in the book.” Is this true?
Eddie: Once again, FAKE NEWS! We have NOT used every trick in the book! In fact, I still have one trick left that we’ve been developing in our in-house “skunkworks” (aka athleisureware) department which is code-named Negative Dividend. Instead of paying out to shareholders, we CHARGE them to own our stock. We then become like a conspicuous consumption brand and everyone will want to own us. The money they make on share appreciation will be multiples of what the dividend costs, so shareholders will still be better off.
CFO: …and here’s the beauty part! Just as we launch our Negative Dividend campaign, Marketing will roll-out our new messaging initiative, renaming ourselves “Shears”...and we'll call everyone who's still hanging on to this POS "Shear-holders" because apparently they love being fleeced! Also, were are purposely trying to “Break the Buck” because a kicker goes into effect, and we’ll be able to return to Shears & Roe-Buck like the good ole days..
Analyst: POS?
Eddie: Oh sorry. Around here we call anyone still hanging on to our stock as having a Piece Of Sears - or POS - for short – for “short” - oh, sorry, Freudian slip. I didn’t mean you should short the stock or anything. Oh no, it’s on its way UP UP UP!
Analyst: Sorry, but where I’m from, POS usually stands for something else – but I guess it’s interchangeable.
Board: Dilly Dilly.
Analyst: Eddie, your hairline shares a striking resemblance to that of Eddie Munster from the popular 70’s show The Munsters. So, two part question – DID you play Eddie Munster, and if so, are you a werewolf? I mean, you have to admit that your shapeshifting ability has come in handy as you’ve “transitioned” Sears from a profitable retailer into profit-sucking vortex of galactic proportions. Eddie? Eddie?
CFO: Somebody wake up Eddie and get him another one of them “Firewaters.”
Eddie: Sorry, I dozed off there. I was kind of in a Sears Holding pattern there, and then ka-blamo!
Analyst: Okay, last one. A recent article in Talk Markets stated, “Eddie has given new meaning to the phrase ‘Anchor Tenant,’ as Sears has succeeded in financially SINKING every mall they’re in.” Thoughts?
Eddie: Don’t you see? That’s our secret 20-year strategy - to be such a heavy drag on mall operators that they will actually PAY US BILLIONS to leave and never come back. We’re piloting this under our new “Sear-Around!” branding strategy, and if they don’t pay up we’ll just continue to squat on their property until they drown in debt and go bankrupt - and THEY’RE left “Holding the Bag” – which is where the “Holding” in “Sears Holdings” actually comes from.
Claire: So my Snapchat sensei says that memes and mashups are the only ways to reach Millennials and Centennials.
Eddie: Claire it’s so nice to have someone so fluent in ecommerce on our executive team. In fact, we should call you eClaire! You see what I did there? E-Claire, eclaire…anybody? No? Nothing? Now I’m hungry. Is there a Chipotle nearby?
Board: SMH
Eddie: Actually Claire, we’re spring-loaded to launch some dynamite mashups we’ve concocted, featuring new consolidated hybrids created by combining some of our legendary legacy brands including CraftsEnd, LandsMore, DieMan, and KenHard! They’ll be like the Mr. Potato-Head of brands. Nothing will really fit, but it’s fun to play with. Also, I hear Candyland is gonna be HUGE this Christmas! And clay.
Board: Huzzah infinity. Meeting adjourned.
ADDENDUM: (In Memorial)
On May 25, 2018th, Sears will officially declare Chapter 11….and 12…. and 13. In fact, the aftermath of this Earnings Call will prove to be so cataclysmically and historically AWFUL that biographers will actually refuse to call it an “Earnings Call” anymore, citing the “Sears Rule,” and forever requiring reporting companies to actually have “attempted” to earn money during the prior quarter, and if not, notify shareholders in advance that it will be a “Burning Call” e.g. “We effectively burned your capital during the last quarter to prop up our money-losing enterprise.”
Doug O’Bryon, Managing Director Briarcliff Capital
(* I DO NOT - I repeat - DO NOT hold any stock in Sears *)