Sears is in trouble.
The company has shut down hundreds of stores in recent years and has been selling its most profitable locations to raise cash.
Today, the company made the big announcement it was considering spinning off its Land’s End and Sears Auto Center businesses — a huge sign that the brand is deteriorating, said Brian Sozzi, chief equities strategist at Belus Capital Advisors.
“Every asset sale brings Sears closer to death,” Sozzi said.
Here are the five most disturbing announcements Sears made today.
1. Spinning off properties. Parting ways with its well-known Land’s End and Sears Auto businesses shows that the Sears brand is desperate to raise cash, Sozzi said. “The company is pushing off the inevitable,” Sozzi said. “Because here is the real deal: at some point in our lifetime, Sears will run out of assets to sell to raise cash to fund operations.”
2. Sears is bombing in Canada. The company is selling off prime real estate there, opening up space for competitor Target, Sozzi said.
3. Sales are down. The namesake brand’s domestic sales are down 4.8%, putting Sears in a way worse position than competitors like Wal-Mart or Target.
4. The company isn’t investing in the future. “Sears says it’s ‘managing its capital expenditures more efficiently’…and that’s the problem,” Sozzi writes. “Sears spent 0.9% of its annual 2012 revenue on capex…Macy’s spent 3.4%.”
5. Rewards program. The “Shop Your Way” rewards program is “eating the company from the inside out,” Sozzi said. “It’s driving lower quality sales today and opening the floodgate for even more margin-killing promotions in the future.”
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