Sears the Death Spiral Continues

Just when we thought things could not get any worse or crazier at Sears Holdings (NASDAQ: SHLD) they did.

The dying retailer has opened at least one concept store in Fort Collins, Colorado, Forbes reported. The store is supposed to show off Kenmore Appliances to customers. A mattress concept store is apparently planned as well. The hope apparently is to turn Sears into an appliance and mattress retailer which sounds pathetic.

The focus on appliances at Sears will amuse North Carolina resident Tom Fleming. He has been waiting months for the parts to repair his Kenmore front loading washer, WRAL TV reported. The parts are apparently on backorder at Sears; which means the washer cannot be repaired. The machine reportedly quit just 10 days after Fleming bought it.

Sears is planning to focus on appliances when it cannot even service the appliances it has sold. Disturbingly one reason why the parts are on backorder might be that Sears has not paid the supplier because it is out of money.

Is Sears out of Money?

There are strong indications that Sears has run out of money. The company is unable to make payments on a $400 million loan that was due on June 30, 2018.

Sears was able to renegotiate some of the loan terms and get the payment date pushed back to January 20, 2019, Retail Dive reported. That means Eddie Lampert knows he will not have the money in June but may in January 2019. One way he can get the money would be to sell off Sears’ real estate.

Sears is now broke it had to borrow money from the Pension Benefit Guaranty Corporation (PBGC), Retail Dive also reported. The PBGC is the federal agency that covers pension obligations when private entities cannot. Sears apparently has at least $407 million in pension obligations it cannot meet.

Sears Incredible Losses

The losses at Sears are absolutely incredible ycharts data dated October 31, 2017, indicates.

Some of the disturbing highlights of the catastrophe at Sears include:

  • Sears lost more than one-fourth of its revenues between October 2016 and October 2017. Ycharts reported that Sears’ revenues shrank at a rate of -27.22% during that period.

 

  • Sears “profit margin” was -15.25% on October 31, 2017.

  • Sears Earnings per Share (EPS) ratio was -10.93 on October 31, 2017.

 

  • Instead of income Sears reported a loss of -$1.1172 billion on Halloween Day 2017.

 

  • Sears reported a free cash flow of -$781 million on 31 October 2017.

 

  • Sears lost -$1.874 billion in cash from operations during third quarter 2017.

 

  • Sears had an Enterprise Value of $4.635 billion December 14, 2017.

  • Sears achieved a Market Capitalization of $416.46 million on December 14, 2017.

 

  • Sears Liabilities were nearly four times greater than its enterprise value on December 13, 2017. Sears reported $12.20 billion in total liabilities on October 31, and $4.633 billion in Enterprise Value on December 13, 2017.

 

  • Sears assets were less than its liabilities, Sears reported $8.193 billion in assets on October 31, 2017.

 

  • Incredibly Sears’ somehow managed to keep some money in the bank, it reported $200 million in cash and short-term investments on October 31, 2017.

 

Sears’ Incredibly Shrinking Revenue

Sears revenue losses are accelerating. The company reported $25.94 billion in revenues in October 2015. That number fell to $23.39 billion in October 2016; indicating shrinkage of $2.55 billion. Sears revenues fell to $18.38 billion in October 2017, which means they fell by $5.01 billion in 12 months.

If this keeps up Sears revenues might be less than $10 billion by sometime in 2019. Unless of course, the revenue losses double again, which means Sears would worth around $8 billion in October 2018. It looks as if the end is finally in sight in Sears, and everybody but Eddie Lampert can see it.

The most incredible thing at Sears is that somebody; probably Lampert, was willing to pay $4.387 a share for its stock on 14 December 13, 2017. There is no value here, although speculators might be able to make some money selling the stock to Lampert, who apparently owns most of it.

Sears stockholders received a 31.87% return on equity on October 31, 2017. They should certainly send Eddie a nice thank note for that.

Expect to see store closures and collapse at Sears next year. Also, expect to see lots of unhappy customers that cannot get their Kenmore appliances serviced.

The next likely scenario is that Sears will sell off Kenmore, possibly to Amazon (NASDAQ: AMZN), Home Depot (NYSE: HD), Best Buy (NYSE: BBY), or Lowe’s (NYSE: LOW). Any of those companies would be smart to have Kenmore as an exclusive appliance brand. Sears is finished but Kenmore might survive.