I do not see how embattled retailer Sears Holdings Corp (NASDAQ:SHLD) survives this one. I’ll get into details in a moment, but the long and short is that Sears management is pulling planks from the foundation and burning them to keep the house warm. Asset and real estate sales — raising cash to pay down debt — is all well and good. But the problem for SHLD stock goes much deeper.
Sears is destined for bankruptcy because brick-and-mortar retail is dying a death of a thousand cuts.
Look at Circuit City. Look at J C Penney Company Inc (NYSE:JCP). Look at declining sales at Macy’s, Inc (NYSE:M) and Target Corporation (NYSE:TGT). Consumer retail stocks are in trouble, and that includes SHLD stock.
The reasons are two-fold, but only one is fixable.
The fixable part is a lousy recovery, still slogging along after eight long years. Perhaps the new administration’s policies will jump-start things again.
The second problem is not fixable. It’s called Amazon.com, Inc. (NASDAQ:AMZN).
Amazon Has Killed the Need to Go Out
There’s a simple and terrible fact when it comes to department stores like Sears. That fact is that department stores, by and large, sell low-margin commodities. Think about it. Walk through a SHLD store and tell me what you find there that is specialized retail.
There isn’t anything.
Consumers are learning that rather than spend time, buying gasoline, waiting in line at the register, paying state tax, and wandering all over the store to find what you want, you can cut to the chase by going to Amazon. It sells everything. You can find what you want in no time, read reviews, order and have it shipped to you.
For the cost of a Prime membership, it’ll even show up in two days at no extra cost.
Other than clothing, which some people want to try on, there is simply no reason to go to a store any longer. Sears could have sold its Craftsman business ages ago, because there are hardware superstores that sell all that gear cheaply as well.
And there’s ruinous news coming out of the retail sector.
Moody’s says one out of every seven retail companies in its retail and apparel portfolio is a distressed issuer — the largest since the Great Depression. Of these retailers, about $1.2 billion of debt is due by the end of next year.