Noodles & Company Falls Back To Earth, Still Not A Bargain

About 14 months ago fast casual restaurant chain Noodles and Company (NDLS) had one of the most successful initial public offerings of the year, more than doubling on its first day of trading from an offer price of $18 per share. That very day I warned how overvalued the stock was at its then-$36 price. Investors trampled over each other to buy the shares for a few more days (the stock peaked at $51.97 on its third day of trading) and then reality slowly began to set in. Paying more than 40 times cash flow for NDLS, or any stock for that matter, is a very dangerous proposition.

After several quarters in the public spotlight, many recent high-flying IPOs have crashed and burned. Most are in the retail space, such as The Container Store (TCS) or Zulily (ZU). Amazingly, even after huge drops, most of these stocks are not yet bargains. Circling back to Noodles & Company, which is trading below $20 per share today after reporting lackluster earnings last night, the stock still trades at about 15 times cash flow (enterprise value of more than $600 million for a company that booked EBITDA of about $20 million during the first half of 2014). That price is still on the high side of fair, even if you believe in the growth story and think NDLS will succeed in continuing to grow its unit base by double digits annually for many years to come. I’m not a huge fan of the company to begin with, so a 15 multiple is not even in the ballpark for me to consider it as an investment, despite the fact that I have favored growth stories in the restaurant area for a very long time.

For bargain hunters, it certainly makes sense to watch these recent IPOs as they crater back to earth. However, be careful not to jump at something just because it is down 50% or more from its peak. NDLS is a perfect example of a stock that is down a ton (62% in the past year) but is still not cheap. You really need the valuation to be favorable to justify bottom fishing in recent IPOs. Some of them went so far above a reasonable price right out of the gate that a price drop alone puts them in the “less expensive” category, as opposed to “undervalued.”

Full Disclosure: No positions in NDLSTCS, or ZU at the time of writing, but positions may change at any time

Sears Holdings: Confirmed Third Party Tenant Leases

As has been discussed on this blog, Sears Holdings (SHLD) has been devoting material resources in recent years to leasing out space in the company’s stores. That way the company can close or reduce the size of money-losing locations and lease them to other retailers in order to boost cash flow. This post will keep a running list of confirmed Sears and Kmart locations where retailers have signed a lease to occupy space. Since the company discloses minimal information about its leasing activities, my hope is that others will contribute to this list (please use the comments section to share links to articles or other evidence of leases not listed here) and it can be a valuable shared online resource for those who are watching the ever-changing operations of Sears.

Update: 04/01/15 – Today Sears Holdings announced the formation of Seritage Growth Properties, a new REIT that will commence trading on the public market in June 2015. Seritage will purchase and lease back 254 stores from Sears Holdings, as well as own a 50% interest in a joint venture with GGP that will operate another 12 stores. As a result, going forward the list below will only be updated with third party leases signed by Sears Holdings itself. Since Seritage will be filing publicly there is no need to reproduce updated information about that entity on this site going forward. The list below will be rearranged to better reflect these developments. Please continue to provide new leases for the list, as Sears Holdings is selling less than 40% of their owned stores to Seritage and will retain a large number of valuable properties for the time being. 

Update: 05/18/15:  – Seritage Growth Properties has updated their registration filings to include Q1 2015 pro-forma financial results:

Total revenue: $68 million

Operating expenses: $24 million

G&A expenses: $5 million (including $4 million of public company costs)

Joint venture income: $6 million

Pre-tax income: $45 million

Interest expense: TBD (example: debt of $1.25 billion at 5% implies interest of $16 million per quarter)

For those of you trying to pinpoint a value for Seritage, annualized funds from operations (FFO) should be in the neighborhood of $120 million annually. This figure assumes $1.25 billion of debt (leverage ratio of 6.9), which is simply a guess given that we do not know the capital structure yet. I will update these figures when the terms of the deal and the ratio of equity to debt is known.


Last Updated 04/01/15

LIST OF CONFIRMED SEARS HOLDINGS LEASES

Entire Kmart Stores (3 locations, ~250,000 SF)

Ansar Gallery – Free-Standing Store (Tustin, CA) – 108,000 sf >>> link
Fiesta Mart – Free-Standing Store (Houston, TX) – 42,000 sf >>> link
Zion Market – Free-Standing Store (San Diego, CA) – 94,500 sf >>> link

Kmart Box Splits (5 locations, ~200,000 sf)

Best Buy (proposed) – Free-Standing Store (Rockford, IL) – 45,000 sf >>> link
Gold’s Gym – Free-Standing Store (Charlottesville, VA) – ~25,000 sf (estimate) >>> link (photo only)
Kroger – Village Square at Kiln Creek (Yorktown VA) – 90,000 sf >>> link
Planet Fitness – Free-Standing Store Sublease (Sacramento, CA) – 22,000 sf >>> link
Rio Ranch Market – Free-Standing Store (Desert Hot Springs, CA) – 29,000 sf >>> link

Sears Box Splits (7 locations, ~350,000 SF)

Forever 21 – South Coast Plaza (Costa Mesa, CA) – 43,000 sf >>> link
Level 257 Restaurants – Woodfield Mall (Schaumburg, IL) – 40,000 sf >>> link
Primark – Willow Grove Park Mall (Willow Grove, PA) – 77,500 sf >>> link
Primark – Freehold Raceway Mall (Freehold, NJ) – 66,500 sf >>> link
Primark – South Shore Plaza (Braintree, MA) – 70,000 sf >>> reader tip
Sears Hometown Stores – Offices at Sears HQ (Hoffman Estates, IL) – 36,000 sf >>> see SEC filings
Whole Foods Market – Friendly Shopping Center (Greensboro, NC) – 34,000 sf >>> link

Sears Full Property Redevelopments (1 location, ~80,000 SF)

Marianos/Sears/TBD Rebuild (Elmwood Park, IL): ~80,000 sf (planning stages) >>> link

Sears Auto Center Redevelopments (9 locations, ~150,000 SF)

Woodfield Mall (Schaumburg, IL): ~30,000 sf total >>> link
Colonial Park Mall (Harrisburg, PA): ~18,000 sf >>> link
Genessee Valley Mall (Flint, MI): 12,000 sf >>> link
Lincoln Mall (Matteson, IL): ~13,000 sf >>> link
Northwoods Mall (North Charleston, SC): ~16,000 sf >>> link
RiverTown Crossing Mall (Grandville, MI): 12,000 sf >>> link
Smith Haven Mall (Lake Grove, NY): 8,000 sf >>> link
Woodland Mall (Grand Rapids, MI): 20,000-40,000 sf >>>  link

In-Store Embedded Space (~3.65 Million SF)

Lands End: 236 locations (as of 01/22/15), 7,400 sf each = ~1.75 million sf >>> link
Sears Optical: 541 locations (August 2014), 1,500 sf each (est) = ~800,000 sf >>> link
Jackson Hewitt: 400 locations (December 2012), 2,000 sf each (est) = ~800,000 sf >>> link
Sears Hearing Centers: 191 locations (February 2014), 1,500 sf each (est) = ~300,000 sf >>> link

 

SERITAGE GROWTH PROPERTIES STORES PREVIOUSLY LISTED ABOVE:

24 Hour Fitness – The Village at Orange (Orange, CA) – 54,000 sf >>> link
Aldi – Free-Standing Store (Hialeah, FL) – 18,000 sf >>> link
Aldi (Hackensack, NJ) – 17,000 sf >>> no details known, headline only on seritage.com
At Home – Pueblo Plaza (Peoria, AZ) – 105,000 sf >>> link
At Home – Willowbrook (Houston, TX) – 134,000 sf >>> link
At Home – Kickapoo Corners (Springfield, MO) – 113,000 sf >>> link
At Home – Free-Standing Store (Ypsilanti, MI) – 92,000 sf >>> link
At Home – Free-Standing Store (Phoenix, AZ)- 152,000 sf >>> link
Altamonte Mall Auto Center (Altamonte Springs, FL): ~16,000 sf >>> link
Aventura Mall Redevelopment (Aventura, FL): ~275,000 sf (design plan submitted) >>> link
Corner Bakery – Westfield UTC Mall (San Diego, CA) – ~4,000 sf >>> link
Destination XL – Corbins Corner (West Hartford, CT) – 8,500 sf >>> link
Dick’s Sporting Goods – Mall at Rockingham Park (Salem, NH) – 79,000 sf >>> link
HomeGoods – Hastings Ranch Plaza (Pasadena, CA) – ~27,000 sf (estimate) >>> link
Kroger – Cumberland Mall (Atlanta, GA) – 93,000 sf >>> link
License Bureau Inc: (St Paul, MN) – ~3,500 sf (est) >>> link
McCain Mall Auto Center (North Little Rock, AR): ~21,000 sf >>> link
Nordstrom Rack – The Mall at Sears (Anchorage, AK) – 35,000 sf >>> link
North Riverside Park Mall Auto Center (North Riverside, IL): ~21,000 sf  >>> link
Oglethorpe Mall Redevelopment (Savannah, GA): ~50,000 sf (actively seeking tenants) >>> link
Old Time Pottery – Free-Standing Kmart Store (Orange Park, FL) – 84,000 sf >>> link
Primark – Staten Island Mall (Staten Island, NY) – 70,000 sf >>> link
Primark – Danbury Fair (Danbury, CT) – 70,000 sf >>> link

Ridgedale Center (Minnetonka, MN): ~25,000 sf total >>> link
Sears Outlet (6 stores in MA/NC/NV/VA/WI) ~150,000 sf (estimate) >>> see SEC filings
Sears Hometown (3 stores in IL/KS/MI~30,000 sf (estimate) >>> see SEC filings
Ulta – Marketplace at Braintree (Braintree, MA) – 11,000 sf >>> link
Westland Mall Auto Center (Hialeah, FL): ~43,000 sf (actively seeking tenants) >>> link
Whole Foods Market – Colonie Center (Albany, NY) – 32,000 sf >>> link

Pembroke Mall (Virginia Beach, VA)
REI – 27,500 sf >>> link
Nordstrom Rack – 32,500 sf >>> link
DSW – ~25,000 sf (estimate) >>> link

Landmark Crossing (Greensboro, NC)
Floor & Decor – 70,000 sf >>> link
Gabe’s –  50,000 sf >>> link
Sears Outlet – ~25,000 sf (estimate) >>> see SEC filings

Janss Marketplace (Thousand Oaks, CA)
DSW – ~25,000 sf (estimate) >>> link
Sports Authority – ~45,000 sf (estimate) >>> link
Nordstrom Rack – 40,000 sf >>> link

King of Prussia Mall (King of Prussia, PA)
Primark –  – 100,000 sf >>> link
Dicks Sporting Goods – ~75,000 sf >>> link

Burlington Mall (Burlington, MA)
Primark –  70,000 sf >>> reader tip
Auto Center –  ~60,000 sf (actively seeking tenants) >>> link

Westfield Countryside Mall (Clearwater, FL)
Whole Foods Market –  – 38,000 sf >>> link
Nordstrom Rack – Westfield Countryside Mall (Clearwater, FL) – 38,000 sf >>> link

Oakbrook Center (Oak Brook, IL)
Pottery Barn – ~16,000 sf (estimate) >>> link
Pinstripes – 40,000 sf >>> link
Auto Center – ~17,000 sf total >>> link
West Elm – ~14,000 sf (estimate) >>> link

 

“Profitless” Amazon Myth Lives On Thanks To Lazy Financial Media

Last night CNBC premiered their newest documentary entitled Amazon Rising. I tuned in, as I have thoroughly enjoyed most of their previous productions. I found this one to have a noticeably anti-Amazon vibe, but none of the revelations about the company’s business practices should have surprised many people, or struck them as having “crossed the line.” For me, by far the most annoying aspect of the one-hour show was the continued insistence that Amazon “barely makes any money” and “trades profits for success.” It’s a shame that the media continues to run with this theme (or at least not correct it), even when the numbers don’t support it.

Most savvy business reporters understand the difference between accounting earnings and cash flow, the latter being the more relevent metric for profitability, as it measures the amount of actual cash you have made running your business. There are numerous accounting rules that can increase or decrease the income you report on your tax return, but have no impact on the cash you have collected from your customers. A good example would be your own personal tax return. Did the taxable income you reported on your 2013 tax return exactly match the dollar amount of compensation that was deposited into your bank account during the year? Almost by definition the answer is “no” given that various tax deductions impact the income you report and therefore the taxes you pay. But for you personally, the cash you received (either on a net or gross basis) is really all that matters. One can try to minimize their tax bill (legally, of course) by learning about every single deduction that may apply to them, but it doesn’t change the amount of pre-tax cash they actually collected.

As a result, the relevent metric for Amazon (or any other company) when measuring profitability should be operating cash flow. It’s fancy term that simply means the amount of actual net cash generated (in this case “generated” means inflows less outflows, not simply inflows) by your business operations. In the chart below I have calculated operating cash flow margins (actual net cash profit divided by revenue) for five large retailing companies — Costco, Walgreen, Target, Wal-Mart, and Amazon — during the past 12 months. The media would have you belive that Amazon would lag on this metric, despite the cognitive dissonance that would result if you stopped to think about how Amazon has been able to grow as fast as they have and enter new product areas so aggressively. After all, if they don’t make any money, where have the billions of dollars required for these ventures come from? The answer, of course, is that Amazon is actually quite profitable.

AMZN-CFO-Margins

As you can see, if we measure “profitability” by actual cash collected from customers, over and above actual cash expenses, as opposed to the accounting figure shown on their corporate tax return or audited income statement, Amazon’s profit margins are actually higher than each of those other four companies. Shame on the media for giving everyone a pass when they insist Amazon doesn’t make money, or at least “barely” does so. They make more money, on a cash basis anyway, than many other large, well-known retailers whose profit margins are rarely questioned.

Full Disclosure: Long Amazon and Target at the time of writing, but positions may change at any time.

Sears Holdings Third Party Tenant Leased Space Surpasses One Million Square Feet, Capital Needs Remain Overwhelming

As has been well documented, one of the strategies being used by Sears Holdings (SHLD) to try and stop the financial bleeding at the company is to lease out space to third party tenants. Since many of its stores are too large given the company’s ever-shrinking customer base, Sears is splitting up some of its stores (many of which are owned outright, not leased) into multiple units in order to reduce its own retail footprint and boost revenue by collecting rent from third party tenants.

For example, here is a picture of Sears’ Oakbrook Center store in the suburbs of Chicago:

IMG_20140507_105321004_HDR

At first glance it might look like any other outdoor mall, but the Pottery Barn stores are actually part of the Sears building (the Sears entrance is around the corner by the columns). Sears likely collects about $500,000 in rent from Pottery Barn annually for these subdivided spaces.

Former Kmart stores are also being leased out to retailers who can accommodate larger box sizes. Home decor chain Garden Ridge, which is in the process of rebranding their 70+ stores with the “At Home” moniker, is actually Sears’ largest third party tenant currently (excluding Lands End, which leases space inside existing Sears stores and until recently was owned by Sears), occupying five closed Kmart stores. Those deals have put Sears over the 1 million square foot mark for third party retail leases. That’s the good news.

The bad news is that leasing 1 million square feet, which took the company about 2 years of serious effort to reach (Seritage Realty Trust, Sears’ in-house leasing operation, was formed in 2012), is just a rounding error for this $30 billion per year company. In order for third party rental income to reach just 1% of Sears’ annual revenue, the company would have to rent out about 20 million square feet of space, which could easily take 5-10 years.

I estimate that between now and the end of 2016, Sears needs to come up with $2.7 billion in cash just to cover its pension obligations, interest on its outstanding debt, and capital expenditures for their current store base. Where will this money come from? That’s the problem for the stock right now, and why I see more short-term pain ahead for Sears Holdings shareholders. Even if we were to assume that Sears’ retail stores breakeven on an operating cash basis (which they are not doing right now, hence why this capital is not going to come from operating profit), the company still needs to come up with several billion dollars.

Management has announced they are exploring monetization options for both Sears Auto Centers and its ~50% stake in Sears Canada, but even if both were sold they are unlikely to fetch more than $1.2 billion in a very optimistic scenario. That leaves another $1.5 billion to find somewhere. Sears Holdings currently has about $600 million of cash in the bank, so further asset sales or more debt will be required simply to get the company funded for the next two and a half years. After all of that cash goes out the door, the asset base left for shareholders will be materially smaller than it is today.

This is why I am waiting on the sidelines, despite the clear value in Sears’ vast real estate portfolio. As long as the company continues to burn through cash operationally, more and more assets will need to be sold simply to cover capital needs. Even if they continue to lease out space to other retailers, it simply is not enough to help financially in any meaningful way. By waiting things out, but continuing to monitor the situation closely, I am hoping that over the next couple of years, more and more assets are shed out of necessity, and I might have an opportunity to buy the stock at a lower price, and with more of the assets concentrated in the owned real estate (the debt holders and the pensioners can have Sears Canada and Sears Auto Centers — they’re not good businesses). If that happens, there might be a time down the road when the price investors have to pay, relative to the assets and liabilities on the books, represent an attractive investment opportunity. Since I don’t see things getting better in the short term, I think it’s too early to invest in Sears Holdings for the real estate.

Full Disclosure: Long Sears Holdings bonds at the time of writing, but positions may change at any time

Sales Figures Disprove Thesis That Whole Foods Shoppers Are Fleeing To The Competition

I wanted to briefly follow up my post from yesterday (The Death of Whole Foods Market is Likely Greatly Exaggerated) with a telling chart. The financial media has been reporting that Whole Foods Market (WFM) is being hurt by lower cost natural food grocery stores, thereby implying that the company has less brand loyalty and differentiation than some had previously thought. I would challenge the notion that WFM is losing customers to other stores. While it could happen in the future, the sales data show that WFM’s sales per store are actually continuing to rise:

WFM-AWS-2001-2014

Not surprisingly, the growth in average weekly sales per store peaked in 2007 and dropped 11% during the 2008-2009 period. Customers came back quickly post-recession, however, enabling WFM to reach record sales per store just two years later in 2011. Not only have sales increased every year since, but they are continuing to rise this year. This is definitely a number to watch as times goes on to gauge potential customer defections, but the idea that Whole Foods stores are beginning to really struggle is completely unfounded if you look at the data. It might make for a good story, but it’s not very helpful for investors.

The Death of Whole Foods Market Is Likely Greatly Exaggerated

I am always amused (and oftentimes thrilled) when Wall Street wakes up one day and decides a company’s fate has changed forever, despite very little actual evidence supporting such a view. Severely harsh winter weather earlier this year put a lid on sales and profits at many retailers, and the result has been very poor stock market performance for many consumer-oriented companies. Others have been hit by worries over online-only competition or simply an increase in the number of players competing in the marketplace.

Consider Whole Foods Market (WFM). The pioneer of the natural food grocery business has gone from market darling to growth stock has-been in a matter of months, with investors sending the stock down nearly 20% in a single day after the company released its most recent earnings report, and the shares now sit at multi-year lows. How bad was WFM’s first calendar quarter of 2014? Well, the company reported record sales and record sales per square foot at its stores. Same store sales rose a very impressive 4.5% versus the prior year. But Wall Street focused on profit margins, which narrowed slightly year-over-year and quickly concluded that Whole Foods is dead, a victim of ever-growing competition. After reaching a high of $65 late last year, the shares now trade in the high 30’s.

WFM-2YR

With all of the new competition aiming squarely at Whole Foods, how can they possibly compete effectively and continue to post strong financial results for their shareholders? Recent stock market action is telling us that investors have given up on the company. The media headlines have been extremely negative too. Nonetheless, in the face of extreme pessimism, I am a buyer of the stock. Let me tell you why.

There is no doubt that Whole Foods is facing more and more competition every day. For years people thought the natural foods business was a niche market, but now they are coming to realize that it has gone mainstream in many markets across the country. Not only have traditional grocery stores added natural and organic sections to their stores, but smaller Whole Foods wannabes are popping up too. In fact, many of them are newly public, such as Sprouts Farmers Market (SFM), Fresh Market (TFM), and Fairway (FWM). But guess what? They can all coexist.

As consumers opt for healthier food, natural foods will increase their share of the overall food market and there will be plenty of room for multiple players to operate stores profitably. Witness Whole Foods’ +4.5% same store sales number for last quarter. If people were really leaving Whole Foods and switching to these other stores (the bears say price will be the biggest reason), their sales would not be rising faster than the rate of food inflation. Despite new competition (Sprouts and Fresh Market combined have nearly as many stores nationwide as Whole Foods, and all three are doing very well), Whole Foods has a very loyal customer base and there are few signs that they will abandon Whole Foods.

I think a great way to think about the future of Whole Foods is to compare it to another strong pioneering consumer brand that sells a high-end product to a very loyal customer base and has faced enormous competition over the years; Starbucks (SBUX). The similarities to me are uncanny. Think about how many companies have tried to eat into Starbucks’ growth in the specialty coffee market. Scores of local coffee shops have popped up urging you to support your neighborhood business, and big players like McDonalds (MCD) and Dunkin Donuts (DNKN) have littered the market with me-too coffee options. And what happened? Did Starbucks’ customers flee in favor of a slightly less expensive drink? Not at all. Interestingly, the new players did well too. Both Dunkin and McDonalds sell a lot of coffee, even as Starbucks continues to thrive.

That is exactly how I see the natural foods story playing out. Whole Foods Market will cross the 400 store mark later in 2014. Ultimately they see room for 1,200 stores in the U.S. alone. Their growth is far from over and I expect them to continue to be seen as the leader and industry pioneer for many years to come (just like Starbucks).

Here’s the best part; the stock is cheap and most people don’t realize it. At first blush it doesn’t look undervalued. Whole Foods will earn about $1.50 per share this year and trades at 25 times earnings. A 50% premium to the S&P 500 for a growth company facing stiff competition doesn’t seem like a bargain to most casual onlookers. But you have to dig deeper to see the value.

Since Whole Foods has high capital needs (as it opens new stores at a rapid rate), the company’s operating cash flow dwarfs its reported earnings per share. Depreciation expense last year came to $370 million, or about $1 per WFM share. In fact, WFM generated about $2.70 per share of operating cash flow in fiscal 2013. All of the sudden that 25 P/E multiple comes down to about 14x operating cash flow if you look at actual cash generation.

It gets better. Of that $2.70 of operating cash flow Whole Foods spent more than half of it on capital expenditures, and of that, about two-thirds went towards new store construction. As a result, when we calculate how much cash profit every WFM store generates, we arrive at an impressive $2.25 million. With an expected 400 stores at year-end (which will generate $900 million of free cash flow annually), we can assign a value to the existing WFM store base only, excluding all future development. If we use a very reasonable 15x free cash flow multiple (a discount to the S&P 500), we conclude that the existing store base is worth $13.5 billion.

And that’s the best part of the story. At current prices, Whole Foods trades at an enterprise value of $13 billion ($14.5 billion equity value less $1.5 billion of net cash). That means that investors at today’s prices are buying the existing stores for a very fair price and are getting all future store development for free.

If you share my view of the natural food industry and believe that Whole Foods can continue to be a leader in the market, even in the face of increased competition, then investors at today’s prices are likely going to do extremely well over the next 5-10 years. After all, WFM is only about 1/3 of the way to their goal of 1,200 U.S. stores, and today’s share price does not reflect the likely upside from years and years of future development.

Full Disclosure: Long shares of WFM at the time of writing but positions may change at any time.

Eddie Lampert’s Plan to Keep More Kmart and Sears Shoppers: Help Them Find Out What Appliances Their Friends Have

“How great would it be if you could see what appliances your friends have?”   

— Eddie Lampert, CEO, Sears Holdings

Two weeks ago I flew to Chicago to attend the Sears Holdings (SHLD) annual shareholders meeting. Unlike most of these corporate gatherings, Sears CEO Eddie Lampert takes questions from the audience. Considering that he does not host regular quarterly earnings conference calls or make media appearances, the annual meeting offers attendees a rare glimpse into his thinking as he continues to make the transition from billionaire hedge fund manager to underdog retail executive. While I was not expecting Lampert to divulge many details about his plans to get Sears and Kmart (a merger he orchestrated a decade ago) back to profitability, I did think it would be a chance to try and read between the lines of his comments and determine for myself if he really believes in Sears and Kmart as retailers, or if he simply talks up their prospects because anything else would be un-CEO-like.

The problem I have with Sears Holdings stock, despite the fact that the CEO is the largest shareholder and a self-made billionaire, is that everything that Eddie has done and said over the last decade makes it clear that he believes that he can help turn Kmart and Sears into the relevant retailers they were 20 or 30 years ago. Despite no significant experience in retail, Lampert continues to insist he can “transform” (he likes to make clear that this is not a “turnaround” because the company is changing the way it does business) the company and have it thrive in the most competitive retail environment we have ever seen in the U.S. And this is after a decade of failure in that regard, with sales declining year after year and profit margins negative.

Before taking questions at the annual meeting, Eddie gave a PowerPoint presentation detailing why he is trying to transform Sears and Kmart and how he is going to do it. This is what I was afraid he was going to convey to those of us in attendance; that he is laser-focused on Sears and Kmart as future winners in retail. The plan revolves around four core pillars; incentivizing consumers to shop at Sears and Kmart by offering them Shop Your Way membership points (a rewards card program), offering a Shop Your Way marketplace with millions of items from third party sellers to give members a massive selection of products (think: eBay and Amazon), a social media platform at ShopYourWay.com where members can share advice, research products, and read reviews, and a fast, free shipping program (a cheaper version of Amazon Prime without streaming video).

Lampert’s presentation included a video showing exactly how some of the Shop Your Way products and services are being designed. Among the highlights were e-receipts emailed directly to shoppers, the option to buy online and pick-up in store, curb-side store pick-up where an employee will bring your items out to your car so you don’t have to come inside, employees with tablets helping shoppers in-store, radio frequency identification (RFID) inventory management to ensure stores are stocked appropriately, and digital signs in the store that allow for instantaneous pricing changes and the ability for shoppers to read online reviews as they are looking at the product on the shelf.

He also gave examples of transformation attempts by three other companies; Apple (cost cuts plus successful new products), General Dynamics (divestitures followed by new products), and Kodak (unsuccessful acquisitions that led to bankruptcy). He was quick to state that he was not saying that Sears is like any of those three companies (I would hope not… none of them are retailers). Instead he wanted to point out the sometimes R&D makes sense (Apple), sometimes spin-offs and refocusing on new areas make sense (General Dynamics), and sometimes going on a massive acquisition spending spree because your core product is dying (Kodak, with film) is not the right strategy.

Interestingly, my reaction was somewhat different. I think everybody can point to cases where a certain strategy worked or didn’t work. There are always two sides to every coin and no assurances that a certain path will be successful. The thing I found strange was that he didn’t use any examples in the retail industry. Why not explain why Caldor and Woolworth are no longer in business? Why not talk about how Dayton Hudson was transformed into Target and was a massive success?

Instead, Lampert tried to convince us that he has a vision for where retail is going and Sears is going to lead the industry in getting there. Oddly, this came shortly after he admitted that the reason for the Kmart/Sears merger was to take Sears’ brands off-mall (into Kmart stores as well as new Sears store formats like Sears Grand and Sears Essentials, both of which failed) where retailers like Target and Wal-Mart were expanding. He admitted that was a huge failure and is now actually closing off-mall Kmart stores and renovating Sears stores in the best mall locations they have across the country. His vision was dead wrong back then, but this time around he is going to be right? Why?

He also admitted that all of his retail advisers told him to shut down hundreds more stores after the merger, but he refused and wanted to give them time to get into the black. Now that they are still not making money, he is finally closing them at a faster pace (more than 100 store closures this year are likely, by my math). It just proves that he does not have successful retail experiences to draw from, and as a result is unlikely to turn this ship around.

You may have the same reaction to all of this that I did while sitting through Lampert’s presentation. I couldn’t help but wonder what was different about this shopping experience that Sears was moving towards. Other retailers are already doing these things. In order for Sears and Kmart to really stop the market share losses they have been sustaining for years now, and get back to profitability, they need to be unique. They need to give shoppers a reason to decide that Kmart and Sears really are relevant now, like they were in 1980. Is a rewards card really the answer? What about a third party marketplace just like eBay and Amazon? A social media platform of their own that will compete with other retailers’ presence on Facebook, Twitter, and Pinterest… why will that be successful? Buy online, pick-up in store is not new… and while I don’t know of other retailers who are offering to deliver your items to your car, couldn’t competitors offer that service in a matter of months if they decided to?

The problem with this strategy is that it is not differentiated. If you are a retailer that is not losing market share, you don’t really have to stand out any more than you already do. Your brand is already strong and you have a loyal customer base, so merely matching your competitors in terms of service is good enough to maintain your position. But in the case of Kmart and Sears, they are losing customers because they are seen as old and past their prime. There is no reason to go to Kmart when there is a Wal-Mart down the street, or Sears when there is a Target close by. E-receipts are not going to change this. A rewards card isn’t going to either.

So when the Q&A session began I got up to ask Eddie Lampert that very question; “What are you doing that is different from any other retailer? Why would someone use the Shop Your Way marketplace instead of eBay or Amazon?” I wasn’t a jerk about it, but I honestly wanted to understand why he thought they could start gaining (or at least keeping) their fair share of customers when they have been losing market share to these other stores for years.

Lampert was very reasonable and detailed in his reply. He acknowledged that the things he had discussed were not different or unique on the surface. His explained that his goal is to focus on building relationships with shoppers and do so better than other retailers.  While he knows other stores are doing similar things, he doesn’t think it is a focus for them. If he can do the same things but do them more intensely he thinks he can build a group of loyal Shop Your Way members and return the company to profitability. It is more about keeping the customers he already has ($30 billion of sales in the U.S. in 2013) than it is about getting people to switch from Amazon, eBay, Wal-Mart, or Target.

While answering another person’s question later on, he circled back to my inquiry and simply said “We believe we can build a better mouse trap.” And so that is the strategy going forward; making Sears and Kmart (and the Shop Your Way membership program) a better way to shop by connecting with your customers on a deeper and more helpful level. And that is where his quote about the appliances came in.

“How great would it be if you could see what appliances your friends have?”

Eddie Lampert’s vision is that you will associate appliances with Sears because of the store’sheritage. When you need to buy a new dishwasher you will login to the Shop Your Way web site and use the social platform to see what makes and models your friends have purchased in the past. You will read reviews. You will decide which one you want and buy it online. You will schedule delivery or if you have a truck you can come to the store and pick-it up the same day. You won’t even have to leave your truck, because once you arrive you’ll pull up your Shop Your Way app and tell them you are parked in the dedicated parking space out front. Within five minutes your item will be loaded onto your truck by a Sears employee and you will be on your way back home. Since the item was fairly expensive you’ll earn a bunch of rewards points, which will entice you to shop at Sears or Kmart again soon. The fact that Best Buy, Home Depot, Lowe’s, and HHGregg also sell dishwashers won’t even dawn on you.

In a bubble that all might sound like a great strategic vision with a high likelihood of success. In reality though, I don’t think it is going to work. Kmart competes on the low end with Wal-Mart, Dollar Tree, and Family Dollar. But since they can’t match the prices of those other companies there is really no reason to shop there. The stores are dirty, disorganized, and less stocked. And the online initiatives are easily copied by these other companies (buy online/pickup in store is already a big part of Wal-Mart’s business). On my way to the Sears annual meeting I passed a Kmart with about a dozen cars in the parking lot and about a mile down the street there was a Wal-Mart that was nearly full of cars. Shop Your Way is not going to change that.

Sears has a better chance because they are known for certain categories like tools and appliances. There are a lot of older, loyal customers who have been shopping at Sears for decades. However, the demographics of the U.S. are not moving in Sears’ direction. Younger shoppers aren’t going to be caught dead in a Sears store. They’ll go to Home Depot or Lowe’s instead. And that’s a big part of the problem. The technology that Eddie Lampert is infusing into his retail stores is more attractive to younger shoppers. Many older customers who like Sears today don’t want to use their smartphone to shop (or have one at all). That mismatch is yet another challenge for this “integrated retail” strategy. Going on ShopYourWay.com to see what appliances your friends have bought only works if you are an engaged Shop Your Way member and your friends are also avid users of the Shop Your Way web site. If you are 50 or 60 years old you are not going to find your friends on that site. And you aren’t likely to have the Shop Your Way app downloaded on your phone.

As I left the Sears annual meeting, I realized that nothing I had heard or seen had changed my mind about the likely future success of Sears and Kmart as retailing operations. That said, I was glad I made the trip (it’s not everyday you can ask a billionaire and brilliant stock picker a question and have them take 5 minutes to answer it in depth). It is obvious that Eddie Lampert has moved on to focus on new things in his life. After 25 years as a wildly successful hedge fund manager, he is now interested in running companies more than simply investing passively in them. That explains why he has not used Sears’ cash to invest in or buy other businesses that are not shrinking with each passing day like Kmart and Sears. He is looking to build a new business, not his net worth (which he has already done).

While I hope he succeeds, I don’t like his odds, for all of the reasons explained here. As long as his focus is on Kmart and Sears as retailers, investors are better off allocating their capital to Sears debt (the company is not in financial trouble, despite many media headlines to the contrary) and/or watching from the sidelines for any signs that Eddie is finally admitting defeat and shifting strategies. As long as the bulk of Sears Holdings’ financial performance is linked to Sears and Kmart’s ability to sell products and services to customers at a profit, I would not be bullish.

Stay tuned later this week when I will publish a follow-up post explaining why the very fact that another very good stock picker owns a large chunk of Sears Holdings stock (Bruce Berkowitz of Fairholme Capital) is not a good enough reason on its own to invest in the company, even though Lampert and Berkowitz together control about two-thirds of the company.

Full Disclosure: Long Sears debt at the time of writing but positions may change at any time. Also, I still own the very small number of shares of Sears stock I bought for the sole purpose of being allowed to attend the annual shareholders meeting, but you should not mistake that for a bullish call on the stock.

Amazon ($AMZN) Sales Growth Projections for Next Two Years Appear Overly Optimistic

Investors have been reallocating capital out of Amazon ($AMZN) shares fairly heavily since the company reported a lackluster fourth quarter earnings report. After peaking over $400 in January the stock has dropped about 75 points to the low 300’s. In fact, I actually think the stock is beginning to look compelling for long term investors, if you believe Amazon will continue to successfully enter new markets, as the shares now fetch only about 1.5 times 2014 revenue (after deducting net cash). While profit margins remain low (cash flow of $5.5 billion in 2013 equated to only 7.4% of sales), those that claim Amazon makes no money don’t seem to dig into the company’s financial statements very deeply.

All of that said, after looking at Amazon’s sales trends over the last 15 years, I believe that Wall Street is currently overly optimistic about sales growth at Amazon for the next two years. If you believe that investors will be focused on sales growth, in lieu of material profit margin gains in the intermediate term, it would imply that Amazon bulls can take their time building long-term investments in the stock over coming quarters.

So why do I think Amazon will be hard-pressed to achieve the current consensus estimates for sales in 2014 (up 21% to $89.9 billion) and 2015 (up another 20% to $107.6 billion). First, let’s look at Amazon’s annual sales since 1998:

AMZN-REV-1998-2015

Simply looking at this data may cause you to feel pretty upbeat about Amazon’s business. Over the past 15 years sales have grown an astounding 41% per year, rising from under $1 billion in 1998 to nearly $75 billion in 2013. Is it really a stretch to asssume that two more years of 20%+ growth could be in the cards?

The problem Amazon is going to begin to face is the fact that once you reach a certain size, it becomes nearly impossible to continue to grow at 40%, 30%, or even 20% per year. Finding an additional $15.4 billion of revenue in a single year (the incremental figure analysts estimate Amazon will book in 2014) is no easy feat. In fact, Amazon’s total revenue in 2007 was just $14.8 billion, so “2014 Amazon” must equal “2013 Amazon” plus “2007 Amazon.” With annual revenue approaching the $100 billion level, the company’s growth rate is likely to begin to slow soon.

Is there any way to know when exactly growth will decline significantly? Not really, but one of the numbers I like to focus on is incremental revenue growth, in dollars, from one year to the next. As a company gets larger and larger, the amount of incremental sales growth needed simply to maintain its growth rate rises fairly sharply. In fact, if we chart out Amazon’s incremental annual sales growth since 1999, we can see patterns emerge:

AMZN-INCREM-REV-1999-2015

For instance, between 1999 and 2006 Amazon was able to grow sales by between $1-2 billion a year (roughly). That figure rose to $4-5 billion from 2007-2009, and accelerated to $10 billion in 2010 after the recession ended. Interestingly, over the last three years Amazon has hit a wall. In both 2012 and 2013, incremental sales growth at Amazon failed to eclipse 2011 levels. I believe this could be the beginning of a period where we see Amazon’s sales growth slow materially.

Perhaps problematic, the current Wall Street consensus forecast calls for Amazon’s incremental revenue growth in dollars to reaccelerate to more than $15 billion this year, and again to nearly $18 billion in 2015 (look at the orange bars in the above chart). While there is no assurance that this figure cannot continue to climb, there will be a time when Amazon simply cannot continue to find that much new revenue each and every year (without making large acquisitions anyway, not something they have typically done). Given that a disappointment in merchandise sales growth has been a key driver of Amazon’s recent stock market weakness, I believe it is entirely possible that both 2014 and 2015 sales forecasts are too high. Maintaining annual sales growth of 20% for much longer seems unlikely, perhaps even starting this year.

As I mentioned at the outset of this article, however, I don’t necessarily think this would spell the end of Amazon’s stock market stardom, at least not long term. If Jeff Bezos is willing to show investors that he is willing to demonstrate that profit margins can be susteained at levels above those currently being attained, investors would likely be very pleased and any short term stock decline would quickly be reversed. After all, annual sales approaching $100 billion offer Amazon the ability to generate some very impressive free cash flow, which would make the stock’s current market value of $150 billion seem not so unreasonable.

In coming quarters, I will be focused on Amazon’s sales trends and if I am correct and the current consensus forecasts are too aggressive, any continued short-term weakness in Amazon shares could present investors with an excellent opportunity to continue building a long-term position in the stock.

Full Disclosure: Long AMZN at the time of writing, but positions may change at any time

Checking In On A Sears Property Slated For Possible “Box Split”

Sears doesn’t have a sales problem, it has a profit problem. Whether you agree or not (my personal view is that a sales problem both contributes to, and serves to exacerbate, an underlying profit problem), that’s the conclusion drawn by CEO Eddie Lampert. As a result, he is closing dozens of stores and trying to figure out ways to make others smaller (and therefore perhaps more profitable).

In fact, Sears has a relatively new subsidiary called Seritage Realty Trust that has been given the task of managing (read: restructure and/or redevelop) about 10% of Sears’ locations. Seritage has its own web site, with many of its projects listed. Included on that list are locations tagged for a “box split,” which means they would like to subdivide the current store and rent out space to another retailer. The thesis is that Sears will make more in rental income from the subleased square footage than it did using it to sell Sears’ inventory. In addition, they could see sales per square foot increase in the Sears store that remains open by rationalizing their product selection. Overall, it’s an interesting strategy with potential, but since it is early in the process it is also largely unproven.

There are only 9 “box split” store candidates listed on the Seritage web site and it just so happens that one of them (the Alderwood Mall store in Lynnwood, WA) is only about 30 minutes north of my home in Seattle. This past weekend my wife and I drove up there to check out a new mall (we’ve only lived here for about 6 months) and see what, if anything, of note was happening at the Sears store. Perhaps not surprisingly (given that we are talking about Sears after all), there were some good things, some bad things, and some strange things going on.

First, some good things if you are rooting for Sears to find its footing:

1) The Alderwood Mall is a high-end mall (owned by GGP) located in a suburb of a relatively wealthy city. Sears owns the store outright (it’s not leased). The two floors are 82,000 square feet each, excluding a 13,000 square foot Sears Auto Center attached. You might not think the fact that the mall is high-end jives with the core Sears customer (and I would not disagree), but the real value here is in the fact that the real estate is owned and high end mall space is worth top dollar.

2) This store (not surprisingly given it was selected for Seritage’s portfolio) appears to be an excellent candidate for a “box split.” At ~165,000 square feet it has more floor space than Sears really needs (you should see how many clothes this place is stocking), and it has two exterior entrances but just one mall entrance. This means Sears could split the box in such a way that another retailer could occupy half of the first floor (40,000 square feet) and have a dedicated entrance from the parking lot, while Sears could retain one exterior entrance as well as a mall entrance. Here’s a map of the mall:

alderwood
There are exterior entrances on both the east and south sides of the Sears box, but only one mall entrance in the northwest corner, so Sears can easily split the box into a “north” and “south” section.

3) Despite Sears being known for skimping on capital expenditures since Eddie Lampert took over as Chairman, this store was not falling apart like many others. In fact, it appeared to be in very good condition despite being built in 1979. It’s good to see that capex reductions are not happening at the “best of the best” locations in the Sears property portfolio.

So that’s the good news. But it’s not all good, especially considering that this idea is still very much a development concept. There were no signs of any construction or preparation work being done in the store that would lead one to believe any tenant is close to signing a lease at this location and has asked Sears to get the ball rolling.

You can probably guess what kinds of things stood out as being “same ol’ Sears.” My biggest gripe with the chain has always been that Sears stores are almost always terribly disorganized, making for a miserable shopping experience. It boggles my mind when I go inside one because all I can think to myself is, “has a senior manager ever walked this store, and if they have, how could they not realize that if you simply cleaned up the clutter and organized the inventory in a better way, you would likely see better sales production?” It really doesn’t take much money (or any) to focus on organizing stores better, it’s just time and effort.

How bad was it? Well, how about some pictures:

I don't know about you, but when my wife is in the market for handbag, she definitely wants to find a new tax preparaer and grab a stuffed bear all at once...
I’m not the person to ask obviously, but I don’t think experienced merchandisers would say that handbags, stuffed animals, and tax services go well together. Needless to say, the Macy’s store did not look like this.

 

As for Jackson Hewitt, that’s not the only place they are advertising; they are also targeting shoppers before they even get to Sears:

That's the floor of the main mall area, a few hundred yards away from Sears...
That’s the floor of the main indoor mall area, a few hundred yards away from Sears. No idea if this works, but even if it did, I’m not sure there would be any way to track your return on investment…

 

We also checked out the Lands End section. This is a case where not only does the merchandise they pair with the men’s clothing section make absolutely no sense, but I question why Sears even carries the products at all (stuffed bears in the kid’s section at least would make sense).

Fake tattoos and mustaches to go with your new dress shirt and pants?
Looking for new dress shirts and pants for a new job? Why not add a fake tattoo and mustache to impress your new boss?

 

My wife was actually looking for Lands End socks, but couldn’t find any on the floor, so we asked one of the dedicated Lands End employees for assistance. Despite the fact that she only works in a small section of the store (Lands End shops in Sears stores average 7,400 square feet, which is less than 10% of the first floor of this particular store), she didn’t even know if they had any socks in stock. “It’s really hard to keep track of where things are,” she said. “They move everything around so much.”

So not only is the store disorganized for shoppers, but the Lands End employees can’t even keep tabs on their own inventory. Again, management here is a serious problem. Sears gets called out for skimping on store upkeep, but this is simply an organizational and inventory management issue having nothing to do with money. We finally found maybe 10 pairs of women’s socks on display after wandering the department for a few minutes. None of them were black (a common sock color!?), the color my wife was looking for, so we left the Lands End department empty-handed.

This brings up another issue, because a big part of Eddie Lampert’s “integrated retail” strategy involves carrying less inventory in the actual stores, but installing kiosks that allow you to order online while in the store, in case you need a size they don’t have, or one of the various colors that they don’t stock in physical stores at all. In one of the rare interviews he agreed to do, Lampert explained his thinking to the Chicago Tribune:

“The integrated retail part of our strategy is really about how you work between online, mobile and store, not just from a customer standpoint, but from a supply-chain standpoint,” Lampert said. “If we have a shirt in the store in four colors, we might have that shirt in 10 additional colors online. To have 14 colors in the store may be too risky because what you don’t sell, you end up losing money on, (compared with) having a group of it online that serves all the stores so that if people want more variety, they can get more variety.”

This may sound like a good idea at first blush, but most people who prefer to shop online aren’t coming to your store to then order at a kiosk or their smartphone. More likely, they are in your store because they want to try on or see the actual item prior to buying. If you don’t have black socks in stock, and there 100 other stores in the mall, I think that customer is more likely going to go buy from a competitor. Contrary to what Lampert seems to think, ordering online from an actual store is not always convenient for the shopper. If they wanted to order from your web site, they never would have driven to the mall. And if they wanted to buy a physical product from a store, they are likely going to find better selection elsewhere in that very same mall.

In addition, I am baffled as to why Lampert believes those extra 10 colors sitting in a warehouse awaiting an online order are any more profitable than those same colors sitting in the store awaiting an in-person buyer. Sure you could argue that warehouse space is cheaper than store space, but aren’t the odds higher that someone will see the product and make an unplanned purchase if the item is in a store and not sitting in a warehouse somewhere? Not to mention the fact that Sears shoppers tend to be older, so they are less likely to be avid technology users and more likely to prefer seeing and touching the product before buying it. I think Lampert’s integrated retail strategy might work better for some businesses than others, and I don’t think Sears is a good fit relatively speaking. Perhaps that is a contributing factor as to why sales trends are so poor right now.

Before heading out of Sears, I also checked out the hard lines department, the biggest segment for Sears. I was impressed with the hardware and tools section (one of the largest Craftsman selections I’ve seen) and then I ventured upstairs to check out appliances and electronics.

Appliance department is well organized and there were a couple salespeople ready to assist, but what's that in the background?
Appliance department is well organized and there were a couple salespeople ready to assist, but what’s that in the background?

 

I called this their "electronics jail" but it really reminded me more of a professional hockey or indoor soccer game. I guess they are having issues with theft...
I called this the “electronics jail” but it really reminded me more of a professional hockey or indoor soccer game. I guess they are having issues with theft…

 

This just felt strange. Not a very inviting shopping experience. There was one employee manning the jail, and I doubt it would deter you from browsing if you were looking to make an immediate purchase, but it just seemed so unneccesary, and the first of its kind I have seen. I’d be curious to see if shoppers are less likely to browse an enclosed area like this, assuming they weren’t looking for something specific, just because it would feel like the employees were more concerned with making sure you didn’t steal something, as opposed to enticing you to buy something. My wife and I had a good laugh (and we didn’t go inside, though we did have to raise our voice to ask the saleswoman through the glass where the nearest restroom was located).

All in all, it was an interesting trip. Nothing really has changed about my view of Sears though. They still don’t seem to know what they are doing when it comes to creating a positive shopping experience, relative to their competition, and although they aren’t skimping on upkeep at this valuable piece of real estate, they don’t seem to really be focused on maximizing the profits from the store either. The potential redevelopment opportunity from a real estate perspective is definitely there, but progress is slow. At a mall of this caliber (it’s a combined indoor-outdoor complex that very much represents the typical high-end GGP mall), you would think Sears could really turn their 165,000 square feet into something unique and profitable. Time will tell.

Full Disclosure: In order to attend the 2014 Sears Holdings annual shareholder meeting (Mr. Lampert rarely speaks publicly outside of this event and this year I decided to go) I am long a small “odd lot” (i.e. less than 100 shares) of SHLD stock. However, this is merely to permit me to attend the meeting and not for investment purposes. In addition, I am long Sears bonds as an investment. Positions may change at any time.

Amazon Holiday Fun Facts 2013 ($AMZN)

They never give specific numbers, but Amazon (AMZN) always takes plenty of time in crafting their holiday press releases. Here’s an excerpt from today’s:

Holiday Fun Facts:

  • Amazon shipped to 185 countries this holiday.
  • The last Prime One-Day Shipping order that was delivered in time for Christmas was placed on Dec. 23 at 10:22 p.m. PST and shipped to Carlsbad, California. The item was a Beautyrest Cotton Top Mattress Pad.
  • The last Local Express Delivery order that was delivered in time for Christmas went to Everett, Washington. It was a Plantronics Audio 655 USB Multimedia Headset in Frustration Free Packaging ordered at 12:26 p.m. PST on Christmas Eve and delivered at 3:56 p.m. PST that same day.
  • Amazon.com shipped enough items with Prime this holiday to deliver at least one gift to every household in America.
  • Prime was so popular this holiday, that Amazon limited new Prime membership signups during peak periods to ensure service to current members was not impacted by the surge in new membership.
  • On Cyber Monday, customers ordered more than 36.8 million items worldwide, which is a record-breaking 426 items per second.
  • More than half of Amazon customers shopped using a mobile device this holiday.
  • Between Thanksgiving and Cyber Monday, Amazon customers ordered more than five toys per second from a mobile device.
  • Amazon customers purchased enough Crayola Marker Makers to be able to draw a line around the world four times.
  • The new Xbox One and PlayStation 4 gaming consoles were so popular that at the peak of sales for each console, customers bought more than 1,000 units per minute.
  • Amazon customers purchased enough Rainbow Looms from third-party sellers that the bands can stretch around the circumference of the Earth.
  • Amazon customers purchased enough Hot Wheels from third-party sellers to stretch around the Daytona International Speedway racetrack.
  • Amazon customers purchased enough miniature flashlights to satisfactorily light four collegiate football fields in accordance with NCAA standards.
  • Amazon customers purchased enough running shoes to provide a pair to every participant in the top 10 largest marathons in the world.
  • Amazon customers purchased enough winter boots to keep everyone living in three of the coldest cities in America – Duluth, Minnesota, Butte, Montana, and Watertown, South Dakota – warm for the winter.
  • Amazon customers purchased enough cross-body purses to outfit every attendee at a typical Taylor Swift concert.
  • If you stacked every Himalayan Crystal Lamp purchased by Amazon customers this holiday season, the height would reach the top of Himalaya’s highest peak – Mt. Everest.
  • Amazon customers bought enough books in the Divergent Series – “Divergent,” “Insurgent,” “Allegiant,” and the complete box set – to wrap around Chicago’s Pier Park Ferris Wheel 263 times.
  • If you placed every upright vacuum purchased by Amazon customers end-to-end, they would reach 15 times the depth of the Marianas Trench, the deepest point in Earth’s oceans.
  • If the Nylabone Dinosaur Chew Toys purchased during this holiday season were stacked on top of each other, they would be the height of more than 950 T-Rex dinosaurs.
  • The number of “Star Trek Into Darkness” Blu-ray combo packs purchased would span the distance of 25 Star Trek Enterprise space ships.
  • If you had a single plain M&M for each Eminem album purchased on the Amazon MP3 Store over the holidays, you’d have nearly 100 lbs. of candy-coated chocolate.
  • Amazon customers purchased enough youth archery kits to outfit every resident of Katniss Everdeen’s hometown, District 12, four times over.
  • Amazon customers purchased enough Tovolo Sphere Ice Molds to fill Don Draper’s (of “Mad Men”) whiskey glasses for 251 years.
  • Amazon customers purchased enough Cuisinart Griddlers to place one in every McDonald’s restaurant in the world.