Sears Holdings remains deeply in a negative territory and most likely not viable as a retailer, according to analysts at Evercore ISI in a note to investors.

Evercore analysts Greg Melich and Josh Schwartz issued a Sell rating on the shares of Sears Holdings (SHLD) after the company reported its financial results for the first quarter of 2015. The retailer reported a net loss of $2.85 per share and $5.88 billion revenue for the period.

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Sears Holdings (SHLD) Is Not Viable As A Retailer: Evercore ISI

Sears quarterly results was “abysmal”

Melich and Schwartz described Sears’ quarterly results as “abysmal” from a top-line standpoint. However, they noted that the company delivered a “modest improvement in EBITDA and FCF as it reduces promotion and exposure to unprofitable categories like consumer electronics.”

According to the analysts, although the modest decline in the retailer’s FCF burn is positive ($632 million in 1Q14 vs. $578 million in 1Q15), it is still in a negative position. They estimated that Sears will burn $1.5 billion FCF in 2015.

Melich and Schwartz noted that the liquidity of Sears by the end of the first quarter was “exceptionally tight.” According to them, the company’s liquidity will be largely alleviated by the funds it will receive from its REIT offering in the second quarter.

Based on Sears’ computation, its $1.2 billion liquidity in the first quarter would become $3.4 billion. According to the analysts, the fund will be suffiend until the holiday even at a $1.4 billion burn rate.

Melich and Scwartz noted that Searsl secured $1.175 billion in committed funding on a 2020 revolver with plans to obtaine $2 billion in extended funding in the second quarter.

According to them, “While this revolver may outlive the $3.1B in cash from Seritage at a ~1.5B FCG burn rate, we would expect fairly onerous terms including a higher rate and asset backing given current availability impairment due to the triggering of the fixed charge coverage ratio.”

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Sears is the structurally the weakest retailer in the U.S.

Melich and Scwartz said Sears in the structurally weakest among the large retailers in the United States. According to them, the shift from the mall to off-mall-box retaiulers resulted to significant share loss.

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The analysts noted that Sears still burned $1.6 billion of cash and recorded a 10.9% decline in same-store sales in the first quarter of 2015 despite implementing significant reduction in working capital and SG&A.

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Sears likely has little to no value after REIT transaction

Melich and Schawarts suggested that the REIT is “end-state and likely the only hope to realize current equity value.” According to them, the REIT needs to find third-party renters to occupy Sears’ stores at a faster rate than today to be able to increase its equity value. They observed that current third-party rents are below what is necessary to justify its current pre-REIT SHLD stock price.

Sears Scenario Analysis

“The REIT is an end-state to separate assets from liabilities and likely falls short while SHLD likely has little to no value post-REIT,” according to the analysts.