Broadline retailer
Sears Holdings Corporation
(
SHLD
), which continues to face a cash crunch, heaved a sigh of relief
by closing the sale of its 11 full line stores to General Growth
Properties. The sale resulted in $270 million cash flowing toward
the company.
The 11 Sears stores located in Florida, Hawaii, Illinois, Iowa,
Minnesota, Oklahoma, Texas, Utah and Washington were sold as part
of the company's announcement in December 2011. The company
announced to pull down shutters on 100 to 120 Kmart and Sears
full-line stores to trim down costs and produce cash. Further, the
company expects to produce $140 to $170 million of cash from store
closures through inventory clearance.
Sears also indicated in the release that the stores under sale
will continue to operate under the Sears name through 2013 and 2014
as the company is yet to determine the final closing date. The
announcement for the completion of the transaction is expected to
come later this year.
Sears has long been grappling with weak top-line performances
and even weaker bottom-line results. What's more frustrating for
the company is the deteriorating margins, followed by the rising
inventory and debt levels.
Sears registered a loss of $4.52 per share in fiscal 2011
compared with earnings of $1.97 in fiscal 2010, primarily due to
lower revenue and decreased margins. Revenue during the fiscal year
decreased $1,097 million to $41,567 million compared with $42,664
million in the previous fiscal. The decline in revenue not only
reflects lower comparable store sales at the company's each and
every segment but also reduced Kmart and Sears full-line stores in
operation during the fiscal year.
Last month,
The Wall Street Journal
reported that Sears is likely to sell its Lands' End brand in an
urge to enhance liquidity while improving operating performance.
The Journal stated that Sears Holdings, who is already in talks
with various private-equity firms, is looking to raise about $2
billion in cash from this sale. Further, the company is looking to
structure a sale-and-license-back deal, through which Sears will
hold the license to sale Lands' End products.
In a separate story, Sears Holding has announced its intention
to split its Sears Hometown and Outlet businesses. The move will
help the company in concentrating on core business activities while
raising funds in the range of $400 million to $500 million. The
separation will be done through a proposed rights offering and the
proceeds will be used for general corporate purposes.
The crux of the matter is Sears is trying hard to optimize its
financial performance through a string of measures for enhancing
its growth prospects. The company's focus is now on improving its
structure by dipping investment in sections of the company that no
longer contributes significantly to its growth.
Apart from this, the company will focus on cost containment,
inventory management, and merchandise initiatives to improve
margins through leverage on buying and occupancy expenses.
Sears Holdings, which competes with
Wal-Mart Stores Inc.
(
WMT
) and
Target Corporation
(
TGT
), currently retains a long-term Underperform recommendation.
Besides, the company has a Zacks #3 Rank, implying a short-term
Hold rating.
SEARS HLDG CP (
SHLD
): Free Stock Analysis Report
TARGET CORP (
TGT
): Free Stock Analysis Report
WAL-MART STORES (
WMT
): Free Stock Analysis Report
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