With Few Assets Left to Sell, The End of Sears Holding Corp Is Near

Advertisement

SHLD stock - With Few Assets Left to Sell, The End of Sears Holding Corp Is Near

Source: Mike Mozart via Flickr

Just for the record (and as tough as it might be to believe), Sears Holdings Corp (NASDAQ:SHLD) is still around. It’s true!

Granted, it’s drowning in a sea of irrelevancy, with the company’s own incompetency as much to blame for it as Amazon.com, Inc. (NASDAQ:AMZN) is. But, for the time being anyway, the once-iconic retailer as well as SHLD stock continue to limp along.

The end, though, does seem to be in sight.

The latest chapter in the sordid saga? After another poor quarter, the company has decided to close another swath of stores. Specifically, following last quarter’s 30% plunge in revenue, a same-store sales dip of 12% and a loss of $424 million, the retailer says it’s going to shut down another 72 locations.

And yet, CEO Eddie Lampert — who effectively owns or controls the bulk of the company anyway — continues to act as if his Rome isn’t burning.

It is.

More of the Same Misery

Last quarter was the 26th consecutive quarter Sears has posted weaker year-over-year sales numbers, by the way. The company hasn’t turned a true, operating profit since 2011.

Indeed, though the absolute loss has been (more or less) shrinking since 2016, that’s not been because the Sears is turning things around. It’s because the company has been shedding its capacity and capability to take losses.

Over the course of the past decade, the retailer has shed nearly half of its stores in an effort to get rid of the “underperforming” ones. (Apparently, most of the ones still in operation are also, technically, underperforming.)

SHLD stock has fallen more than 30% in just the past few days, with most of the loss being the market’s response to the earnings and store-closure news.

It’s time to acknowledge the “transformation” Lampert first started talking about as far back as 2009 isn’t working.

Rather, what Sears (and Kmart) have done is a years-long liquidation of assets under the guise of an overhaul — a reworking billed as something that would once again make the retailer competitive with the likes Walmart Inc (NYSE:WMT), J C Penney Company Inc (NYSE:JCP), Home Depot Inc (NYSE:HD) and Target Corporation (NYSE:TGT), all the while fending off the aforementioned Amazon as well as it could.

If that was always the plan, Lampert hasn’t let on.

Not that it matters at this point. Most investors have lost interest already, as have analysts. There’s only one analyst rating left for the company right now. It’s likely that coverage of the company has only been maintained for the same reason most investors continue to watch it bleed to death — morbid curiosity as to how the farce has been allowed to go on for as long as it has.

There is an answer. That is, of the 108 million shares of SHLD stock still outstanding, the bulk of them are either owned by Lampert, his hedge fund ESL Investments, or another hedge fund called Fairholme that has a close working relationship with ESL and Lampert (though even Fairholme is now looking for the exit).

He would effectively have to vote himself out of a job. But, doing so would disallow Lampert from a string of self-dealing he’s done — mainly, the purchase of assets and culling out the company’s most valuable real estate.

That self-dealing, not surprisingly, mostly shields Lampert from the company’s continuing meltdown.

Bottom Line for SHLD Stock

None of this is actually news to the few non-insider shareholders left, of course. This has been the trajectory for years now. Each year, however, brings the company one step closer to its end. What is new is that, with few marketable assets left to sell to supply much-needed cash, the money-bleed will start to be felt even faster than it has.

Sure, Lampert is likely telling the truth when he says he’s received “numerous inbound inquiries” about the Kenmore brand name and other assets like PartsDirect and some of its remaining real estate. That could buy more time, even if the company has yet to prove it can do anything fruitful with fresh funding.

Take a closer look, though. Inquiries aren’t offers, and the alleged parties are calling ESL rather than Sears. It’s a concern, as ESL’s first priority is ESL and not SHLD stock owners. It’s not as if any inquiry is guaranteed to turn into an offer anyway.

Also note that beyond the Kenmore brand name, PartsDirect and some real estate, there’s not much left to lop off and turn into cash.

And so, while Sears continues to deteriorate at the same pace it’s been unraveling for years now, observers may be about to see something different. There’s not much blood left to give in the company’s effort to stay alive. The story, by this time next year, could finally be over.

On the other hand, that’s a prediction that’s been made for the past several years.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2018/06/with-few-assets-left-to-sell-the-end-of-sears-is-near/.

©2024 InvestorPlace Media, LLC