Who could have predicted this? What a shocker? This is another dead canary in the coal mine. Sears/Kmart is the anchor for hundreds of dying malls across the country. The extend and pretend on developer loans for these malls is over. No rent = no debt & principal payments = developer bankruptcies. REITs have been crashing as the smart money tries to escape the coming calamity. More bank losses, real estate developer bankruptcies, and tens of thousands in lost jobs. Don’t worry – all is well.
The United States of America also has a going concern problem, but that is a few years off. Just don’t think about it. It’s only maff.
Sears Plummets After Citing ‘Substantial Doubt’ About Future
Sears Holdings Corp. suffered its worst stock decline in six weeks after acknowledging “substantial doubt” about its future, raising fresh concerns about whether a company that was once the world’s largest retailer can survive.
Sears added so-called going-concern language to its latest annual report filing, suggesting that weak earnings have cast a pall on its ability to keep operating. The 131-year-old department-store chain, which has lost more than $10 billion in recent years, was cited last year by Fitch Ratings as a company at high risk of defaulting.
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The disclosure comes after more optimistic signs from the company, which has been working on a turnaround under Chief Executive Officer Eddie Lampert. Sears posted a narrower loss than predicted in the fourth quarter, and it has pledged to lower its debt burden and cut annual expenses by at least $1 billion. That upbeat assessment had helped propel the stock in recent weeks. The shares had gained more than 60 percent since Feb. 9.
That rally fizzled with Tuesday’s filing, sending Sears’s stock down as much as 15 percent to $7.77 in New York trading. It was the biggest intraday drop since Feb. 7.
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” the Hoffman Estates, Illinois-based company said. But the company added that its comeback plan may help alleviate the concerns, “satisfying our estimated liquidity needs 12 months from the issuance of the financial statements.”
Lampert, a hedge fund manager who is also Sears’s biggest investor, aims to reduce debt and pension obligations by $1.5 billion. The CEO has helped keep the ailing retailer afloat by offering more than $1 billion of assistance, including a $500 million loan facility announced in January.
As part of its comeback plan, Sears has closed stores, sold real estate and offloaded businesses. Earlier this month, the department-store chain completed the sale of its Craftsman tool brand to Stanley Black & Decker Inc. for about $900 million.
Sears, which also operates the Kmart chain, has reviewed its DieHard batteries and Kenmore appliance brands for potential sales.
“While our historical operating results indicate substantial doubt exists, we want to be very clear that we’re taking decisive actions to mitigate that doubt,” Howard Riefs, a Sears spokesman, said in an email.
In a separate report, Payless Inc., yet another struggling discount shoe chain, was preparing to file for bankruptcy as soon as next week, according to people familiar with the matter Bloomberg noted, and added that the company is initially planning to close 400 to 500 stores as it reorganizes operations. Payless had originally looked to shutter as many as 1,000 locations, and the number may still be in flux, according to one of the people.
Payless’s bankruptcy would add to a tumultuous year in retail, with several bankruptcies and hundreds of store closings — even at companies that aren’t distressed. The industry is racing to try to adapt to more online purchasing and a shift away from mall shopping.
Payless was bought by private equity firms Golden Gate Capital and Blum Capital Partners in 2012 as part of the breakup of publicly traded Collective Brands Inc. The company, founded in 1956 in Topeka, Kansas, employs almost 22,000 people, according to its website. It has more than 4,000 stores in 30 countries.
As a result of the hundreds of upcoming storefronts between just these two companies, mall operators are bracing for another collapse in rental revenue, which in turn continues to provide fuel to the “big short” trade, namely shorting the debt of mall REITs via CMBX, which as of this morning, hit new lows.
JC Penny next? Nieman Marcus?
How about shit stores like Yankee Candle Company? 560 locations.
There are way too many Lowes and Home Depots – see if some of them close also.
My sense is that Sears will probably do its bankruptcy filing sometime in the second half of 2017. They may try a Chapter 11 restructuring, but my view is that a Sears restructuring would be an exercise in futility. They should simply put Sears and K-Mart into liquidation and close both chains.
After that, I think the contest for the next really big retail bankruptcy will be between J C Penney and Macy’s, though Dillard’s, which is much smaller, might be a dark horse in that competition. I seriously doubt that both Penney’s and Macy’s will survive the next 5 years.
Among higher-end retailers, there is probably a contest brewing between Neiman Marcus and Nordstrom’s to see which does a Chapter 11 filing first.
What’s the first three words a Mexican child learns? Attention K-Mart Shoppers!
How Michael Jackson really died: He was listening to the radio, a K-Mart ad came on and said “Little Boys Pants – Half Off”. Hearing that, Michael died of a heart attack.
lol
If they would just sell more at a bigger loss, they could make it up on volume!
Anybody else miss the Sears that was? Back when your parents got that giant catalog and anything you could possibly want was in there? Back when Craftsman tools were the bees knees and you knew that they wouldn’t break, but if they did you could just go back to the Sears store and get a brand new one? Back when you could do all your shopping in one store – clothes, shoes, tools, vacuum cleaners, home goods, etc., etc. – and you knew that even though they weren’t the fanciest things you could find they were well made and reasonably priced.
How many of you guys got caught by your mom or older sister looking at the underwear models,aka grade school porn, and had the catalog taken away?
Assuredly it’s the effect of creative destruction; the old weeds dying off to leave room for new growth but this was a great American company. I recall in my college marketing class circa 1970 being taught that their store motto “Satisfaction Guaranteed” was a landmark business paradigm. It meant if there was anything you didn’t like once you took it home you could get your money back, no questions asked. The Sears catalog was a staple in American homes when we were the undisputed champs. I got my 1st bike (3 speed English Racer) from Sears and was so excited I took it the 10 miles home rather than in the trunk of Mom’s car.
So long Ole Pal. Give my regards to Mr. Roebuck.
Department stores stopped selling furniture and appliances back in the late 70’s. They also have either none or a very limited selection of housewares and dishes. About all department stores sell today is women’s clothes ( and a limited selection of men’s clothes).
Sears – selling everything – didn’t fit in a Mall to be selling water heaters, and table saws. The apparel was out of date. I’m surprised they lasted as long as they did.
This is expected but also really bad news.
I have big trouble buying clothes and footwear in terms of ‘fit’- I need to try them on before I buy. Sears, J C Penny, etc., allow me this necessity.
Mail order I would not like.
With JC Penny, Sears, and K-mart closings announced, this area is going to be hit hard.
I read this last night. I was going to stick a link to it in one of the threads but couldn’t find place to put it. Reading it made me smile cause I have been reading here for years about the coming calamity as predicted by Admin. Turn out to be 100% correct in analysis. Sears is a turd circling the bowl. The only brand that they had, Craftsman, having been finally sold.
There ain’t much meat left on this dead horse.
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Soon enough even that Lampert Vulture fellow is going to lose interest in picking the bones.
Sears has been dead for years, looks like the funeral is about to commence for the “Big Store”.
I know jack shit about retail, but I don’t get it. There is no fuckin’ difference that I can see between K Mart and WalMart except for grocery, so how can one prosper while the other one sinks?
You just answered your own question.
Wonder if Cramer still has Eddie’s back. All that empty retail space he owns was going to be Eddies salvation
Out with the old, in with the new..
Perhaps if Sears had been more progressive, they wouldn’t have been the victims of progress.
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All they gotta do is start selling hotdogs and pizza like Costco and advertise themselves as “green” and tranny-friendly and they’ll be back on top.
No shit. What is Costco’s magic sauce? My wife loves that place and it’s a warehouse that we pay to have the privilege of visiting to spend our money at. The parking lot is 90% German and Japanese luxury cars so the people shopping there either got dough or are doing a good job of pretending.
I’ll grant you that their prices on a lot of things is very good and I like the fact that I can get cow for the grill, a big bottle of JD and a new set of tires all in the same place but…it’s a warehouse. One that sells $10,000 earrings the better half drools at every week before she heads over to look at clothing stacked up on tables made from shipping pallets.
Costco’s magic is quality. They have really nice produce, meats, frozen foods, and a limited amount of grocery items. Yes, you have to buy in quantity, but it’s at least 50% than the grocery store.
We buy all our gas at Costco – it’s usually 10 cents a gallon cheaper, and they have 16 pumps – takes me about two minutes to get gas. Never will I go to a gas station / convenience store, where niggers are parked the wrong way, you go in – 4 registers – only one person working – people buying scratch off tickets ……
Not so. Here in western Washington state the prices including gas are no cheaper than anywhere else. But you still have to pay $65 for membership. I quit going.
I loved my Sears Stereo System with turntable, 8 track, and cassette player all in one, circa 1978.
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OMG I had that exact unit. It ate my Double Live Gonzo tape.
lol…
ah fuck too funny! Way better then shit on radio now.
Double Live Gonzo. Good times that spinning vinyl!
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Sheeit! My best friend has that exact same model in his shop. It does have about a foot of dust on top of it though. It’s been on his favorite FM station and turned on for 20+ years straight. (not counting power outages) He leaves it on so tweekers think he’s in there. I do believe he has Double Live Gonzo on 8-track as well. I’ll have to check.
I wish that fucking Starbucks would fold also.
God yes. Problem is, as long as there are clueless, urban liberal hipsters with credit cards, I am afraid Starbucks will be around.
What a piece of shit. Had something very similar myself, which carved strips out of my vinyl with every play. Bought my first god system not long ago – and it was a major revelation.
My family were huge Sears shoppers back in the day and I have allot of fond memories of the stores near my house. Not sure what year this took place, but many years ago Sears had their own label on everything. Their electronics and tv’s were called Silvertron or Silvertone. Anyway, they couldn’t compete with the other department stores selling the likes of Sony, Panasonic etc…So, in a HUGE move, they dropped their brand and started selling name brand products that people recognized. I was just a kid back then, but remember what a big deal this was to Sears shoppers. Was almost like Sears threw in the towel because the competition was eating them up. Seems like the old days again…
Hey Heff, are you a ‘white nigger’ ? Just askin’
These retail closings and failures are really Barry’s legacy that will be erroneously blamed on Trump. Not fair; but then life & politics “aint.”
Interesting comments as I was at a Sears that is closing today. Sears is the longest controlled implosion of a retail store ever. Would they be missed today if they shut down? NO! As you smart guys point out you can get anything you want anywhere else. The only thing Sears was good for in my opinion was that they always had deals on returned or floor model stuff. I haven’t payed full price for a lawnmower, leaf blower and floor jacks ever. Belt driven 12″ dual bevel miter saw and hypoid worm gear saw bought for a song. Am I a contractor who needs a Rigid or Bosch brand saw, no. Anyhow at the Sears I was in today the JC Penney is soon to be closing. Again it won’t be missed although I got deals there on occasion. The Richmond Town Mall on the east side of Cleveland will soon be gone with other malls that had gone before it. The only viable tenants left there are Planet fitness and a movie theater. Agree that we are now seeing a huge implosion of retail stores and malls because of changes in technology, economics and demographics. If most of the mall’s customers are black it will soon close, end of story. With ebay and craigslist it’s amazing the deals that can be found so why pay for shit new and worse borrow for it! We have too much crap in this country as it is and the adjustment will be painful for the communities that had malls and now will have a huge blight that dies slowly.
Look at Deadmalls.com if you want to see ghosts of malls past.
Sears Enters Death Spiral: Vendors Halt Shipments, Insurers Bail
by Tyler Durden
Mar 23, 2017 1:26 PM
When we commented yesterday morning on the unexpected “going concern” notice in Sears’ just filed 10-K which sent the stock crashing, we pointed out the immediate spin provided by Eddie Lampert’s distressed retailer which promised that its comeback plan may help alleviate the concerns, “satisfying our estimated liquidity needs 12 months from the issuance of the financial statements”, to which however we added the footnote that “the question is what happens when vendors start demanding cash on delivery as concerns about SHLD.’s liquidity concerns continue to grow.”
As it turned out, we wouldn’t have long to wait, because overnight Reuters reported that the worst case Sears scenario we envisioned for Sears is now taking shape and that suppliers to Sears have told Reuters they are doubling down on defensive measures, such as reducing shipments and asking for better payment terms, to protect against the risk of nonpayment as the company warned about its finances.
The company’s disclosure turned the focus to its vendors as tension is expected to mount ahead of the key fourth-quarter selling season amid rising concern about a potential bankruptcy, they said.
Quoted by Reuters, the managing director of a Bangladesh-based textile firm said his company is using only a handful of its production lines to manufacture products for Sears’ 2017 holiday sales. Last year, nearly half of the company’s lines in its four factories were producing for Sears. “We have to protect ourselves from the risk of nonpayment,” said the managing director, who declined to be identified for fear of disrupting his company’s relationship with Sears.
Furthermore, precisely as we predicted, Mark Cohen, the former CEO of Sears Canada and director of retail studies at Columbia Business School said vendors will keep a close eye on Sears’ finances. “Whatever vendors continue to support them are now going to put them on even more of a short string. That means they’ll ship them smaller quantities and demand payment either in advance or immediately upon delivery.”
He added: “Sears stores are pathetically badly inventoried today and they will become worse.”
Another supplier to Sears, Arnold Kamler, CEO of New Jersey-based bicycle manufacturer and importer Kent International Inc, said he was not surprised by Sears’ Tuesday announcement. He said he noticed a warning sign last year when Sears pushed to increase its purchases, which occurred “because a lot of their current suppliers were either cutting them off or limited them on credit.”
Kamler said he declined to sell Sears more product and that he receives a report once a week from his accounting department because of concerns around billing, payments and deductions.
The Bangladesh-based clothing supplier said Sears’ announcement is making him re-evaluate accepting new orders.
“So far there was only speculation that they would declare bankruptcy in 2017. But now they are acknowledging it, which definitely complicates our relationship with them and our decision to accept future orders from Sears,” the executive said.
A second clothing supplier from Bangladesh who did not wish to be named said he renegotiated payment terms with Sears a year ago and was being paid within 15 days of sending a shipment, compared with the traditional 60 days. He is considering asking the company for an advance payment on orders going forward.
* * *
Sears disagreed, and according to Jason Hollar, the company’s CFO, Sears’ move to raise capital in recent months is helping strengthen the company’s balance sheet he claimed in a blog post.
Sears is “a viable business that can meet its financial and other obligations for the foreseeable future,” Hollar said. He cited a $1 billion increase in liquidity from a new secured loan facility and a new asset-based loan that provided $250 million more in “financial flexibility.” The only problem with this is that Sears continues to be a melting ice cube which while not as bad as Tesla, is burning through hundreds of millions each year, money which in recent years has come out of Eddie Lampert’s pocket, either directly or indirectly, with loan gurantees. At some point even Lampert will realize that throwing away billions to sustain the Sears zombie is no longer a viable strategy, especially if the vendor freak out prompts a sudden need for cash which the company does not have.
Speaking of Sears’ cash, here are some more details from Reuters:
Sears’ cash position has shrunk dramatically in recent years. Sears, which lost $2.22 billion in the year ended Jan. 28, 2017, had $286 million in cash on hand, down from $609 million in 2012. Retailers in distress often use their accounts receivable to finance operations, and Sears had $466 million in receivables, down from $635 million in 2012.
So is a bankrtupcy inevitable? Well, yes, and increasingly so with every passing day that the company avoids filing.
Neil Saunders, managing director at retail research firm GlobalData, said tension will grow as the year goes on. “As we move towards the last quarter, I think we’ll find there are more and more suppliers that are not necessarily willing to engage with Sears” and will demand cash up-front.
Another sign of Sears’ weakness is that insurance companies that once provided policies to Sears vendors – insuring against nonpayment for their goods – are no longer doing so.
Doug Collins, regional director for risk services at Atradius Trade Credit Insurance, said his firm has stopped providing insurance to Sears vendors. “We tried to hang in as long as we could,” he said. “Vendors may try to get a few more cycles in before the worst happens, and then it just depends if they’re lucky or not.”
Of course, if that’s the case, then Sears has nothing to worry about: if the past 9 years of trading this “market” has shown, is that luck – or hope – is the only strategy that matters for this market, and courtesy of central banks, it always somehow shows up in the last moment.
fraudulent conveyance.
Apparently Fast Eddie will be first in line when the inevitable happens. The loans were at 8% so he will get paid and everyone will be screwed. Admin is correct, no one will sell to Sears because the risk of bankruptcy is too high to insure the sales to Sears. It’s like watching a disaster in slow motion. Go to the stores and you can see it’s over. JC Penney is next as they will go down more quickly.
https://www.bloomberg.com/news/videos/b/61570d6e-d726-4dc6-b526-f425f5aad136