The declines keep coming for Sears Holdings Corp., which saw its stock slip 5.2 percent to $6.52 in Nasdaq trading Monday.
The stock lost 30 percent of its value this year and, in the last week, there’s been increased speculation on when and if Sears might ultimately run out of room to maneuver financially. The thinking has been that the business might hit a wall during late summer due to liquidity constraints.
But given chairman and chief executive officer Edward S. Lampert’s recent financial moves, some financial executives and credit analysts believe Sears has enough breathing room to work on a turnaround for at least another year. That doesn’t mean that Sears is out of the woods. Credit analysts have estimated that Sears’ cash burn rate has gone up another $200 million to $1.8 billion, which means Lampert will have to figure out what other financial magic he can come up with to keep Sears in operation.
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Credit ratings agency Fitch Ratings recently issued a special report on major high-yield retailers, noting that the “magnitude of Sears’ decline in profitability and lack of visibility to turn operations around remains a significant concern.” Fitch noted that Sears’ liquidity was $1.6 billion in 2016 versus $3.1 billion in 2015.
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Earlier this year, the company said it was shuttering 150 more stores on top of the 200-plus that were slated to close at the end of January. Sears also inked a deal with affiliates of Lampert’s hedge fund ESL Investments for a $500 million real estate-backed loan, and it also entered into an agreement to sell to Stanley Black & Decker its Craftsman tools brand for $900 million, although that transaction hasn’t closed yet.
The Wall Street Journal reported on Monday that the cost of insuring $10 million of Sears Holdings bonds against default for five years rose to $4.6 million annually, up from $3.3 million September.
A spokesman for Sears pointed to the $1.5 billion the company recently raised, as well as Lampert’s comment last month that the company is “taking strong, decisive actions” to stabilize the company and improve its financial flexibility. He further noted the sale and leaseback of a handful of properties to CBL at the end of last month for $72.5 million as another move that enhanced the firm’s liquidity.