Skip to footer

'This is the end' for Sears, analyst says

Sears should liquidate, according to a growing chorus of retail analysts including Gary Balter from Credit Suisse. Sears shares have fallen 40 percent in value since last year. 

|
Seth Perlman/AP/File
The Sears logo is seen on a television for sale, in Springfield, Ill. A growing chorus of retail experts are calling for the department store chain to liquidate.

Credit Suisse analyst Gary Balter on Thursday became the latest retail expert to call for struggling department store Sears to liquidate.

In a note to investors, Balter, who has a $20 price target on the company, said recent events at Sears have him singing "This is the end," a nod to The Doors' song, "The End."

By Balter's calculations, keeping up Sears' operations is taking more than $10 a share of value from shareholders each year.

"Let's face facts. Sears is generating negative operating cash flow of between $1 billion and $2 billion [closer to upper end, it looks like] in 2014," Balter wrote. "Unless it sells off real assets while somehow maintaining the cash flow from those assets, this story is not likely to have a happy ending, and that ending continues to depend on suppliers."

Sears shares are currently trading near $29, a decline of more than 40 percent this year.

Balter's report follows news earlier this week that Sears CEO Eddie Lampert will provide the company with $400 million in a short-term loan. Fitch Ratings, which downgraded the company's rating to 'CC' from 'CCC' last week, said the loan is a "temporary and short-term fix to a much larger need for liquidity infusion, given significant cash burn in the business."

Further, it "indicates how tight liquidity is going into the holiday season, with the need for additional capital to fund inventory build-up."

Balter also pointed to the department store's recent comment that it is not fully committing to apparel buys for Christmas at this time—a comment the analyst said suggests the retailer would be hard-pressed to resupply a popular product.

Fitch issued a separate report last week that said Sears' gradually widening credit default swap spreads show market sentiment on the company continues to worsen.

Fitch said Sears needs to generate a minimum of $1 billion in annual earnings between 2014 and 2016, in addition to an estimated $600 million to $700 million in liquidity for working capital needs during the holidays.

In the most recent quarter, Sears posted a net loss of $573 million. In the company's earnings announcement, Lampert said, "Like any transformation, we must first overcome the burden of the initial costs before we can enjoy the benefits."

"We have a large and valuable portfolio of assets that provide us with the flexibility we need to fund our transformation as we proactively work to return Sears Holdings to profitable growth and deliver shareholder value."

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to 'This is the end' for Sears, analyst says
Read this article in
https://www.csmonitor.com/Business/Latest-News-Wires/2014/0918/This-is-the-end-for-Sears-analyst-says
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe