Sears Holdings (SHLD) posted its ninth straight quarterly loss and its 30th consecutive year of declining revenue Thursday. Enough is enough. It’s time to stop calling this a turnaround.
For a long time after Eddie Lampert’s Kmart bought Sears and changed the company’s name, the market waited for him to do something brilliant, like make a killing on the real estate or convert Sears Holdings into his own version of Berkshire Hathaway (BRK.B). It was hard to believe the billionaire investor actually wanted to be a merchant.
Almost unbelievably, Lampert tried to make a go of Kmart and Sears, and that was even before the economy turned against the retail sector. Walmart (WMT), Target (TGT) and Kohl’s (KSS) can’t catch a break these days. What hope does SHLD have?
The amazing thing is that Lampert still isn’t giving up. Sears Holdings is amputating parts of itself, selling off assets and spinning off businesses, to keep Lampert’s dream of making it work as a retail chain alive.
Sears Holdings: A Slow-Motion Liquidation
That isn’t a turnaround. As Warren Buffett likes to say, the problem with most turnarounds is that they don’t turn. This thing didn’t turn years ago when it still had a chance. Sears Holdings – or what’s left of it — is never going to make it as retailer. Lampert’s latest idea of turning Sears Holdings into a smaller operation catering to loyalty-and-rewards program customers is laughable.
Joblessness, job insecurity and stagnant wages mean lower- and middle-income consumers can’t afford the luxury of loyalty to any brand. They need to chase deals and value, and those can change from week to week. Just ask the dollar-store chains how fun it is to compete for customers that way.
And yet SHLD stock still finds the occasional bidder, even if they don’t stick around for very long. Shares are volatile, which makes them great for traders. They’re also money-losers, so they’ve been ideal for shorts.
But for investors? You ought to have your head examined. SHLD stock is off more than 25% for the year-to-date, and — despite some wild swings — has only blipped into positive territory for a few days at the start of April. Indeed, pretty much any time frame you care to chart shows Sears Holdings to be portfolio death. SHLD stock is off 22% over the last 52 weeks, down for 40% for the last three years, and lost 49% over the last 5 years.
If this were a mutual fund, they would have had to shut it down by now.
Sears Holdings is not a turnaround play. It’s liquidating itself in slow motion. The only reason to pay attention is out of morbid curiosity.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.