Re:Sears has another chance to avoid closing down
by salawat on Tuesday January 08, 2019 @12:47PM
(#18857579)
That smells like Hollywood accounting to me. Or at least abuse of tax law that locks away a potential asset for someone else in order to be able to get out of paying a tax.
Admittedly, I'm still working on wrapping my head around the entire accounting thing, but in general, any material you acquire should be acquired with intent to do something with it. Unless this is some sort of economic "fallowing" technique. But I'm still not sure I'd buy any logic that tried to paint that behavior as anything other than glorified "domain squatting" on a community.
Interesting food for thought though. Good post.
Big box is all about "financial innovations" that juice up financial statements.
Sears owned everything and had to carry most of the costs. Big box retailers like WalMart own as as little as possible, there are a thousand LLCs, trusts, etc that hold the big fixed assets like stores, etc. None of the big retailers own much of anything.
Doing this allows them to operationalize most of their costs. Instead of depreciating a building over 30 years, they write-off all of the value of leasing the building from some other entity. (ie. Store #5622, LLC) It's also a big part of why strip malls have a short shelf life. A dead strip mall with a Tae Kwon Do studio is a depreciated asset that exists to lose money for someone to write off a profitable one.
It works well as long as they hit the growth targets. When these operators miss the mark, even for a short time, you end up with a RiteAid or Linens n Things scenario where the numbers don't add up, and everything goes "poof".