Sears Holding Corp. CEO Edward Lampert again reached into his pockets to lend the struggling retailer another $500 million. Except this time, the money comes from affiliates of Lampert’s hedge fund. With stores closing around the country and dwindling sales, was Lampert right to seek more money for Sears? Is time almost out for the fading industry titan?
Sears Just Closed Down More Than A Hundred Stores. What Gives?
Sears just announced more stores are closing in 2017, bringing the total to 108 Kmart and 42 Sears stores shuttering by April. At the same time, Sears is receiving $321 million from ESL Investments, CEO Edward Lampert’s hedge fund. The company can draw up to another $179 million more should they need. But the better question is, should they even bother?
The 150 store closure represents about 10 percent of the company’s stores. And sears is on track to lose more money as the company reported a loss of $748 million in Q3 last month, up from a Q3 loss of $454 million in 2015. If you take out the closing stores and focus only on operational stores remaining, sales are still down 7.4 percent from a year ago.
Buried in debt?
On top of that, Sears Holding Corp. currently has billions in debt, not only to the CEO and his hedge fund, but to suppliers as well. The funding by Lampert is really just to keep suppliers providing merchandise to the store in hopes that Lampert’s cash injection might turn things around. His vision is to shut down all non-profitable stores and consolidate remaining stores into smaller real estate with stronger online sales.
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If Sears hopes to survive, it can not rely on cash injection loans from its CEO. The company is selling real estate to pay off debt, but that too can only take it so far. For Sears to really have a chance, the company will need to sell off some of its most well known brands, such as Kenmore, Craftsman, and DieHard, as well as its Home Services installation and repair businesses. When Sears took bids for Craftsman in October, estimates pegged the brand’s value at $2 billion. So while Sears does have some bargaining power with its top brands, can the store survive without those brands?
But this problem was already around 10 months ago. Check this video from KCRA News:
Unless Sears changes course and starts generating those online sales within the next year, the company looks like it will be forced to liquidate all assets and brands to cover debt and shut down. While shares of Sears Holding Corporation (SHLD) are up on news of the CEO’s cash injection, don’t be fooled. Expect shares to fall back down sooner rather than later.
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