Latest Sears Loss Fuels Bankruptcy Speculation

“While Sears was once a titan of U.S. retail, it now looks set to sink,” one analyst predicts.
Matthew HellerDecember 8, 2016
Latest Sears Loss Fuels Bankruptcy Speculation

Sears Holdings on Thursday reported its fifth straight quarterly loss and a 14% drop in sales, prompting predictions that the struggling retailer is headed for bankruptcy.

Net loss attributable to Sears’ shareholders swelled to $748 million, or $6.99 per share, in the third quarter, from $454 million, or $4.26 per share, a year earlier.

Same-store sales fell 7.4%, due to weak sales in several categories including apparel, grocery and consumer electronics, while total revenue dropped 14.3% percent to $5.03 billion.

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CFO Jason Hollar acknowledged that the company had “fallen short on our own timetable for achieving the profitability that we believe the company is capable of generating.”

“With that said, the team remains fully committed to restoring profitability to our company and creating meaningful value,” he said in an earnings call.

As Business Insider reports, the company has tried to staunch the bleeding by getting rid of underperforming stores, reducing its dependence on categories that are struggling in its shops and making money from its real estate footprint.

Sears stock has fallen 41% this year. Analysts remain skeptical that it can avoid bankruptcy, with one comparing the company to the Titanic.

“While Sears was once a titan of U.S. retail, it now looks set to sink,” Neil Saunders, chief executive of research firm Conlumino, said.

The company has recorded annual losses in each of its past six fiscal years as it struggles to compete with other mass marketers and online shopping. Its strategy has been to establish a profitable business model built around a smaller store base, online services and a loyalty program.

For the third quarter, comparable sales fell 10% at Sears stores and 4.4% at Kmart stores. Sears’ cash and equivalents declined 12% to $258 million.

CNBC noted that as CEO Eddie Lampert “continues to inject funds into the company, the chain has been able to purchase inventory for its stores, while garnering returns for his hedge fund ESL.”

But Conlumino told Reuters, “It is now too late to turn this around. The rot has well and truly set in and it is just not financially feasible to reverse it.”