Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

Sears: the Horror Show Continues

The Sears Holdings (NASDAQ: SHLD) horror show seems to have no end. Just like a zombie in a b-movie, the decaying wreck of a retailer keeps shuffling forward towards oblivion.

What is truly frightening is that every time it looks as if Sears’ financial numbers have hit bottom – they get worse. For example, Sears’ revenues are now below $20 billion for the first time in recent memory.

Sears reported $19.75 billion in revenues on 31 July 2017, down from $21.05 billion in April. That means Sears’ revenues shrank by $1.30 billion during third quarter 2017.

Revenue loss has become the new normal at Sears between July 2016 and July 2017 its’ revenues shrank by $4.36 billion. Sears reported $24.11 billion in revenues last summer.

Sears Gets Worse Again

It is hard to believe but the revenues are far from the worst numbers at Sears Holdings. Some even more disturbing data ycharts provided about Sears includes:

  • Losing -$1.88 billion in cash from operations during third quarter 2017. This means Sears’ is losing money by just staying in operation. CEO Eddie Lampert would make more money by locking the doors and putting for sale signs on the buildings.

  • Reporting a loss of -$1.362 billion instead of a net income on July 31, 2017. Disturbingly that was an “improvement” over the -$1.51 loss reported in April. Sears is burning over $1 billion in cash every quarter. That’s right folks Sears’ losses now exceed its net income. Way to go Eddie.


  • A market capitalization of $809.06 million on September 11, 2017.


  • Liabilities almost three times greater than Sears’ estimated value. Sears reported $12 billion in liabilities on July 31, 2017. The company had an enterprise value of $4.611 billion on 11 September 2017.


  • Cash and short term investments of $212 million on July 31, 2017.


  • An earnings yield of -166.80% I’m not making this up, see ycharts for confirmation of this horror.

  • Assets of $8.351 billion on July 31, 2017.


  • Earnings per share ratio of -12.73 on July 31, 2017.


  • A “profit margin” of -5.75% at the end of July.


Despite these figures, Sears did make a little money in third quarter 2017 in the worst possible way. Sears reported generating $547 million in cash from financing and $1.498 billion in cash from investing on July 31, 2017. That means Lampert borrowed money against Sears’ assets.

The only ways Sears can make money are to sell or transfer assets or borrow against them. Lampert is likely an underwater homeowner who keeps spending his mortgage equity. Then when the equity is gone, he takes his furnishings to the pawn shop and hocks them to get a little more cash. That process will continue until the Sheriff arrives with the foreclosure and eviction notice.

Sears is the Zombie of Retail

The problem is that Lampert can raise just enough money to keep Sears afloat through various financial shenanigans, but not enough to turn it around. That enables Sears and Kmart to keep shuffling around the neighborhood like zombies.

Like a zombie, Sears is an empty shell of a company. It makes no money and slowly rots away but keeps plodding along. As with a zombie the smell of its rotting corpse annoys the neighbors and drives down the property values.

What is even more pathetic is that Lampert and company are no longer continuing the pretense that Sears and Kmart are viable retail brands. They have even abandoned their efforts to hide Sears and Kmart closings. Instead Sears Holdings is actually releasing store closing lists to the press.

The latest list released on 24 August, contains 28 Kmart stores. Most of those locations are in decaying Rust Belt cities such as Allentown, Pennsylvania, Bay City, Michigan, and Rochester, New York.

Is Kmart pulling out of California, New York, Michigan, Colorado, and New Jersey?

The list makes it looks as if Kmart is pulling out of California, Colorado, New York and New Jersey. There are four California stores, two Colorado locations, three New York Kmart units, and two New Jersey locations.

Kmart also seem to be abandoning its former home state of Michigan (where the chain started) because it is shutting down three more stores there. Kmart might even leave its current home state of Illinois – three locations in the Land of Lincoln are marked for demise.

What is most disturbing about the latest closure list is that almost all but one of the Kmart stores are scheduled to close in mid-November before the beginning of the holiday shopping season. Sears has decided to throw in the towel and not even compete for Christmas shoppers this year.

Will Kmart be gone by Next Year?

It looks as if Lampert has decided that Kmart is a complete loss and has decided to write it off totally. Therefore this historic chain might be gone by next year.

Such predictions are justified by Sears’ same-store sales which fell by 11.5% last quarter, according to Thomson Reuters. Sales at Kmart fell by 9.4% and those at Sears itself by 13.2%.

A few more quarters like that and Sears would have no sales whatsoever. Those figures also prove that Sears’ stock was terribly overvalued at $7.63 a share on 8 September 2017. The only reason investors were buying it was out of the belief that Lampert might be stupid enough to buy even more of the worthless paper.

Lampert’s hedge fund; ESL Investments, is the largest owner of Sears’ stock. ESL lost around 55% of its value in 2016 thanks to Sears, Fortune estimated. That means ESL might soon join Sears in oblivion.

No matter what else happens Sears; once a ubiquitous institution throughout the United States, will be gone from most American communities. The latest list brings the number of Sears’ and Kmart closings in 2017 to 178 or more than 10% of the 1,140 store footprint reported in July.

It looks as if Sears, Kmart and Eddie Lampert’s fortune will soon be history. Hopefully, that will be the final act in the pathetic horror show. Maybe the zombie will finally die or simply collapse from exhaustion.