Sears Shares Fall 30 Percent as Bankruptcy Lurks

Sears

Sears seems to be making its way closer to demise, though the company has certainly prolonged what analysts believe to be the inevitable.

In its latest move to drum up cash, Sears entered into another sale-lease back deal, this time with Tennessee-based real estate investment trust CBL & Associates Properties. As part of the agreement, Sears will sell five department stores and two auto stores to CBL and then lease them back.

The sale-lease back move, expected to bring in $1 billion, is one of Sears’ favorites, but the retailer may now have done it too many times for investors’ tastes.

Shares of Sears stock has fallen as much as 30 percent since Jan. 25, trading at a historic low $6.80 as of publication time. By comparison, Sears stock hit its all-time high of $191.93 in April 2007.

“Sears stock has fallen sharply over the past four trading sessions and is rapidly approaching penny-stock range,” according to financial services firm The Motley Fool. “Many analysts have predicted the company will enter a liquidity crisis this year, forcing it to declare bankruptcy.”

Last week, credit ratings firm Fitch Ratings affirmed its default rating on Sears Holdings citing the company’s $1 billion in losses between 2016 and now, and significant cash burn as the key drivers.

Fitch said it expects Sears’ cash burn to come in around $1.8 billion this year, assuming the retailer brings in $250 million from store closings and buying less inventory.

For the most part, much of what’s left of Sears’ real estate is already promised as payback for its manifold debts, the first of which comes due in July. At that time, 21 Sears properties will pay for its $500 million short-term loan.

Even if Sears sold its remaining businesses—Kenmore, Diehard, Sears Home Services and Sears Auto Centers—plus mortgages the balance of its real estate, that might bring in $2 billion or so, according to The Motley Fool, but it still wouldn’t be enough to get the retailer positioned for any real turnaround.

Sears reported a net loss of $748 million for the third quarter of 2016, and has lost upward of $8 billion in the last five years.

So far this year, Sears has already sold off its Craftsman brand, entered into another $500 million real estate backed loan, announced 150 more store closures and launched an app that uses artificial intelligence to personalize tire shopping—likely another of its undying efforts to dodge the final bankruptcy blow.


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