The stock value of Sears Holdings Corporation (NASDAQ:SHLD) declined by more than 18 percent to $47.81 per share during the midday trading on Friday, after the company reported losses in the third quarter of the current year.
Sears Holdings Corporation (NASDAQ:SHLD) revenue declined by 6 percent to $8.86 billion in the third quarter, and they posted $1.99 adjusted loss per share. The sales of Sears comparable stores dropped by 1.6 percent and Kmart comparable stores also declined by 4.8 percent during the quarter.
Electron Capital Partners' flagship Electron Global Fund returned 5.1% in the first quarter of 2021, outperforming its benchmark, the MSCI World Utilities Index by 5.2%. Q1 2021 hedge fund letters, conferences and more According to a copy of the fund's first-quarter letter to investors, the average net exposure during the quarter was 43.0%. At the Read More
On GAAP basis, the company posted a net loss of $498 million. Its net loss is higher than its $410 million net loss last year, due income tax expenses. The company reported an improved EBITDA of $34 million, including $18 million generated in the United States and $16 million in Canada.
Sears Holdings Corporation (NASDAQ:SHLD) ended the quarter with $633 million cash, immediate availability of $1 billion from its $3.3 billion domestic credit facility, and $400 million from its Canadian Credit facility. Sears has also $5.7 billion equity on inventory.
Kmart’s grocery and household categories declined due to strong competition in the industry. The company’s financial performance was also affected by weak sales in consumer electronics; market shifts and transitions to online gaming applications.
Rob Schriesheim, CFO of Sears, said, “In February, we laid out a number of actions intended to generate more than $1 billion of additional liquidity, improve our financial performance, and unlock value. We have executed against these goals, on track to generate $1.8 billion of additional liquidity and improved our EBITDA by $271 million through the first three quarters of this fiscal year, as compared to the same period last year.”
“We intend to continue to be proactive in generating at least $500 million in additional liquidity over the next 12 months through selective actions that are consistent with our focus on creating long-term value,” added Schriesheim.
In a research note to investors, Credit Suisse Group AG (NYSE:CS) analysts said, “We do not view liquidity as an issue for Sears. It does have assets it can spinoff as it just did with the Hometown Stores, and it has very little in debt until 2008.”
According to them, the Sears Holdings Corporation (NASDAQ:SHLD) division did not achieve the results they expected, but they noticed some positive trends, such as the strong sales of apparel and the appliances, which “continued their bounce back from last year.”
The analysts emphasized that Sears biggest problem is Kmart. Its problem persists due to years of underinvestment, high prices, expansion of dollar stores, and Wal-Mart Stores, Inc. (NYSE:WMT)’s penetration in Kmart’s urban markets. They think Kmart will suffer a permanent decline.
The analysts projected that Sears Holdings Corporation (NASDAQ:SHLD) will end 2012 with $403 EBITDA including $100 million from Sears Hometown. They wrote, “If we assume that Sear can improve EBITDA in 2012 to $600, a 50% improvement, then, we still see the company falling $400 million short on an operating basis due to pension, interest, and capex. There is no liquidity issue as Sears has ample assets to sell or could continue to pull down inventory.”
The Credit Suisse Group AG (NYSE:CS) analysts maintained their “underperform” rating for Sears and a $20 price target.
Hedge fund manager Edward Lampert is the chairman of Sears. He reduced his stakes in the company by 722,489 shares in the third quarter.