Sears: Is Bankruptcy Inevitable? Inside Our Special Report

Sears Holdings Bankruptcy Credit Risk Analysis

Will Sears go under this year?

The 121-year-old iconic retailer has been on bankruptcy watch for several years now. But against the odds, Sears is still around -- and our financial analysis shows the probability of Sears failing this year is not as high as widely assumed. After studying the financial trends, we believe Sears will make it through its full 2016 fiscal year, including the upcoming 2016 holiday season.

Here’s a quick look at some of the findings of our special report. Download the full, in-depth report here

Weak Fundamentals

Sears’ financials tell a grim story:

  • The company hasn’t turned a profit since 2011.
  • It has been losing money since 2012 and is burning through cash at an unsustainable annual rate.
  • As of January 30, 2016, the company had approximately $3.0 billion of debt, with just $316 million left to borrow against its $3.275 billion domestic revolving credit facility.

In addition, Sears’ subsidiary Kmart -- which accounts for 40.5% of Sears’ total (consolidated) revenues for the most fiscal year -- is facing severe competition from discount retailers like Wal-Mart and online retailers like Amazon.

Sears has historically underinvested in physical stores: $1.90/square foot  compared to $9.70/square foot for Walmart, according to the Wall Street Journal. The company appears focused on its online retail program, with internet layaway and Shop Your  Way® program offering customers personalized rewards and coupons. However, to date, these efforts have not translated into bottom-line or cash flow improvements.

Some Strength -- for Now

So how is Sears surviving?

Sears’ foremost strength lies in its substantial real estate portfolio, and Chairman and CEO Eddie Lampert’s strategy to close stores and sell assets is keeping the company afloat. However, our view is that without a significant retail turnaround, it is less than likely that the company will make it past the end of 2017 (FYE January 2018) without failing.

But, we also believe it will last through the 2016 holiday season, given its strong real estate portfolio.

Special Report: Sears Credit Risk Analysis

For more detailed insight into Sears’ financials and future, check our full special report. We examine the latest financial data to take a closer look at these questions:

  • Is a Sears Holdings bankruptcy inevitable? If so, when will it happen?
  • What creative financing options does Chairman and CEO Eddie have left?
  • When will Sears face its next major liquidity crunch?

Get ahead of potential losses with our special credit risk analysis.

Download the full report here

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