Sears Holdings Corporation (SHLD) Stock Is a Dead Man Walking

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SHLD stock - Sears Holdings Corporation (SHLD) Stock Is a Dead Man Walking

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To what extent is Sears Holdings Corp (NYSE:SHLD) on the verge of turning things around?

Sears Holdings Corporation (SHLD) Stock Is a Dead Man Walking

Shares of the beleaguered department store retailer have been on fire so far in 2017. SHLD stock closed Wednesday at $10.43 and has risen 10% year to date. And if you’ve held Sears stock over the past three months, you’re up a whopping 50%-plus.

Why is SHLD climbing? Obviously, the appeal of a cheap stock has contributed to the recent gains. Investors who are in search of a beaten-down name want to believe the 118-year old company can turn things around.

Take Profits in SHLD Stock

But don’t get carried away. Like other brick-and-mortar peers J. C. Penney Company Inc (NYSE:JCP), Macy’s, Inc. (NYSE:M) and more-recently HHgregg, Inc. (OTCMKTS:HGGGQ), Sears has not shown that it can escape the death grip of Amazon.com, Inc. (NASDAQ:AMZN).

During its fourth quarter, revenues of $6.1 billion declined 16% from year over year. The company posted a loss of $137 million, or $1.28 per share during the quarter.

Remarkably, the gains in SHLD stock has come even as the Illinois-based company continues to struggle with revenue and profits and has resorted to closing stores to remain profitable. Last week the company announced it would close more than the 150 stores, which is higher than it previously said it would close. Business Insider said that the store closures include both its Kmart and Sears stores.

“We have a valuable real-estate portfolio, which at the end of the fourth quarter comprised 1,050 leases with significant optionality, as well as 380 owned stores, many in prominent locations,” chief financial officer Jason Hollar said in a recent conference call with analysts. “We will continue to assess opportunities to right-size our store footprint and inventory levels aligned to our ongoing transformation to an asset-light integrated retail model.”

Hollar in March said the company was planning to close stores in an effort to stay liquid and “asset-light.” That’s all well and good, but “asset light” absent revenue growth is not a long-term solution.

What’s more, SHLD has not addressed the big elephant in the room, which is its lack of online strategy. And while the company has survived on delving “less bad” earnings results, at some point growth will begin to matter.

Bottom Line for SHLD Stock

With average revenue declining by 12% in the past four quarters, the rise in SHLD stock has been driven more by short covering than long investors who are buying with conviction of an imminent turnaround. And with short sellers still controlling more than 70% of SHLD stock, these shares should be avoided until management presents a clearer growth strategy that involves more than store closures.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/sears-holdings-corporation-shld-stock-dead-man-walking/.

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