Sears Holdings Corp (NASDAQ:SHLD)
Sears Holdings Corp (NASDAQ:SHLD) announced the closing of 49 Kmart locations and 17 Sears stores by September. Earlier this year, Sears Holdings Corp (NASDAQ:SHLD) announced the closing of 150 stores then added 30 more to the list in May. Possibly more worrying for shareholders, the retailer announced it woulddelay paying off a large portion of a $500 million loan.
In 2003, Sears Holdings Corp (NASDAQ:SHLD) was trading over $25. It stock has since trended downwards in the face of more nimble and skilled competitors such as WalMart (WMT), Best Buy (BBY), and Target (TGT). Sears has also suffered in the digital age with the likes of Amazon taking market share from the entire retail bricks and mortar sector. This is a very different scene than when Sear’s held an unquestioned leadership role in American retail – a position it enjoyed for over a century. Sears Holdings Corp (NASDAQ:SHLD) was responsible for bringing goods to rural Americans that had no real access to traditional retail stores that one could rarely find outside of the city. There are houses still standing today that were ordered through the vaunted Sears catalog. The question is – which will still be standing in ten years’ time? The house, or the company that built it?
Sears Holdings Corp (NASDAQ:SHLD) burns through almost $2 billion of cash per year. So while an annual $1 billion savings plan is welcome news – it still requires more revenues to break even. Many analysts make the case that Sears is I a death spiral. Since 2012 EPS losses have been $29.15, $8.78, $12.87, $15.82, and $10.59. All of those losses have been on top of declining sales numbers. Since 2012, in billions, – $41.57, $39.85, $36.19, $31.20, and $25.15.
Contrarians point out that the future is not as bleak as some would have investors believe. Sales of former Sears brands still bring in royalties. The Kenmore brand is still a market leader and generates revenues of around $4 billion annually. Sears Auto Centers also have impressive revenues – around $2 billion annually. Prior to this most recent restricting, a few analysts have placed Sears Holdings Corp (NASDAQ:SHLD) NAV at over $30 per share. However, monetizing that is problematic – one would be maximizing short-term shareholder value at the expense of long-term viability. For now, the future shows no signs of any activity other than cost cutting.
I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.
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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.