Problems continue to mount at Sears Canada, a unit of Sears Holding Corporation (SHLD), with the beleaguered Canadian retailer’s President and CEO Douglas C. Campbell announced his intention to leave the company last week.
Douglas intends to depart from the company by the end of 2014 to take care of certain personal issues. He expressed his wish to steer the company till a new CEO is appointed, but no later than Jan 1, 2015. Douglas, who joined the company in Mar 2011, has been in the position of CEO since Sep 2013.
During his tenure, he has made every possible effort to turnaround the company’s business, which has been witnessing revenue decline for six straight years.
Additionally, Sears Canada, which faces intense competition from Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), has been divesting assets, closing stores and selling leases for quite some time, in an effort to revive business. Moreover, the company has slashed nearly 3,000 jobs since November last year. Despite these efforts, last month the company reported loss for the 9th time in 14 consecutive quarters.
Another setback for the company was Fairholme Capital Management’s (23% stakeholder in Sears) disclosure that it has failed in its efforts to convince real estate firm St. Joe Co. (JOE) to participate in the $400 million loan to ESL Investments Inc., which is set to fund Sears Holdings’ loan.
On Sep 15, Sears Holdings had entered into a $400 million secured short-term loan agreement with ESL Investments Inc., a hedge fund firm headed by Sears’ billionaire CEO, Edward S. Lampert. Out of the $400 million agreed upon, about $200 million has already been funded on Sep 15 while the remaining $200 million will be disbursed on Sep 30.
All these factors have lowered the interest of potential buyers in Sears’ Canadian stores. While some circles are speculating a possible bankruptcy for Sears Canada, we don’t consider it likely as the company has sufficient inventory to sell during the upcoming holiday season.
Troubles at Sears Holdings
Of late, Sears Holdings has been grappling with deteriorating top and bottom line performances. However, we commend Sears Holdings’ efforts to improve its financial performance and liquidity position through various strategic measures.
The company’s efforts are evident from its last year’s store closures, 14 property sales, including 11 in the U.S. and three in Canada; separation of the Sears Hometown and Outlet Stores business; and by spinning off about half of its stake in Sears Canada.
In the beginning of fiscal 2014, the beleaguered retailer had set a target of raising its liquidity position by $1 billion, which it fulfilled by the recent $400 million loan from ESL investment along with approximately $665 million raised by spinning off its Land’s End business and sale of some properties.
Moreover, to further improve its financial position, the company is planning to sell its remaining 51% stake in Sears Canada. This Zacks Rank #3 (Hold) company believes that the sellout of controlling interest will generate about $2 billion, which will be help in reducing debts as well as financing its ongoing turnaround initiatives.
(We are reissuing this article to correct a mistake. The original article, issued Monday, Sept. 29, 2014, should no longer be relied upon.)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment