The long-anticipated death of Sears Holdings (NASDAQ: SHLD) and its subsidiary Kmart is finally upon us. News stories are full of signs that point to the retail legend’s imminent demise. Some indications that Sears last days are in progress include a long list of store closures.
Sears is closing its last store in its hometown of Chicago. Sears started in Chicago and maintained its headquarters there for well over a century. Chicago’s last Sears store in the Portage Park neighborhood is scheduled for closure in July, The Chicago Tribune reported. A liquidation sale is in progress at another Sears store, and Sears Auto Center next door will close in Mid-May.
Sears closed one-fifth of its stores and laid off 50,000 workers in 2017. CEO Eddie Lampert proposed that his hedge fund ELS Investments “carve out” and buy the remaining value assets from Sears in a letter to his board of directors, National Real Estate Investor revealed.
Those assets include around 200 stores and a few brands such as Kenmore Appliances. Lampert wants to buy and operate Kenmore, Sears Home Improvement Service Parts Direct, Fortune writer Walter Loeb reported. The likely scenario is that Lampert thinks he might be able to sell those products through other retailers like Amazon (NASDAQ: AMZN), Kroger (NYSE: KR), Lowe’s (NYSE: LOW), and Best Buy (NYSE: BBY).
Lambert is admitting that Sears is no longer a viable retail brand that can successfully market its’ own products. Nine Sears stores in buildings owned Lampert’s real estate investment trust (REIT), Seritage Growth Properties (NYSE: SRG) are scheduled for closure.
Employees at two Sears stores on that list received letters announcing that their jobs would end by July 29, 2018, according to Business Insider. These closures are in addition to 166 closures Sears announced earlier this year.
Sears is closing another 23 stores and two Kmart locations. This might bring the number of Sears stores closing this year to 189 or close to 200. Employees at a number of other Sears ‘stores believe their locations will close. Sears is selling nearly 20 stores through an auction that will be held by Realtor Cushman & Wakefield. It looks as if Sears is finally winding down. The retailer’s financial numbers provide even more evidence to back that thesis.
Evidence that Sears is dying include financial numbers that are pretty conclusive evidence that Sears is dead. Sears’ revenues shrank by 27.69% between 1st Quarter 2017 and 1st Quarter 2018. Sears lost $207 million in its operations during 1st Quarter 2018. Sears reported revenues of $4.376 billion for 1st Quarter 2018. That was down from $6.052 billion in 1st Quarter 2017.
That means Sears quarterly revenues fell by $1.676 billion in just a year. Sears annual revenues fell by $6.066 billion in one year. Sears reported annual revenues of $16.702 billion on February 3, 2018, and $22.138 billion on January 28, 2017. Sears’ annual revenues fell below $20 billion for the first time in decades. Sears reported a negative free cash flow of -$813 million for 2017. Sears reported an operating cash flow of -$1.842 billion for 2017.
Sears total assets were valued at $7.262 billion on February 3, 2018. That is less than one-third of the $24.808 billion Sears’ assets were valued at on January 30, 2010. Sears assets have lost around two-thirds of their value in the last eight years. Sears’ liabilities of $4.915 billion on February 3, 2018, exceeded the revenues for 1st Quarter 2018 which were $4.376 billion. Sears had $336 million in cash on February 3, 2018.
Debts of $4.379 billion were slightly larger than the $4.376 billion in quarterly revenue reported for 1st Quarter 2018. Sears stock was trading at $3.13 a share on May 3, 2018. All this brings us to one question how can Sears remain in operation. It seems to be losing money on all its operations. Nor is Seritage Growth Properties, which owns a large number of Sears stores in much better shape.
However, its stock, (NYSE: SRG) was trading at an incredibly unrealistic $35.39 a share on 3 May 2018. Seritage reported an operating income of -$65.16 million and a net income of -$43.21 million for 4th Quarter 2017. Although it did achieve a free cash flow of $12.7 million for 4th Quarter 2017. Leasing space to a dying retail brand is not a profitable business model.
A version of this story initially appeared at Market Mad House. Please visit for more stock and cryptocurrency coverage. Daniel G. Jennings is a highly experienced blogger and freelancer who writes extensively about a wide variety of subjects.