Sears: Is Bankruptcy Inevitable? Inside Our Special Report
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
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.
CreditRiskMonitor is a financial news and analysis service designed to help professionals stay ahead of public company risk quickly, accurately and cost-effectively. More than 35% of the Fortune 1000, plus thousands more worldwide, rely on our commercial credit reporting and predictive risk analytics for assessing the financial stability of over 58,000 global public companies.
At the core of CreditRiskMonitor’s service is its 96% accurate FRISK® score, which is formulated to predict public company bankruptcy risk. One of four key components calculated in the FRISK® score is crowdsourced subscriber activity. This unique system tracks subscribers' patterns of research activity, capturing and aggregating the real-time concerns of what are essentially the key gatekeepers of corporate credit. Other features of CreditRiskMonitor’s service include timely news alerts, the Altman Z” score, agency ratings, financial ratios and trends. CreditRiskMonitor’s network of trade contributors provides more than $135 billion in trade data on their counterparties every month, giving them visibility into their biggest dollar risks.