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Sears Holding Corp. (Nasdaq: SHLD) announced a $900 million deal to sell its iconic Craftsman brand to rival tool maker Stanley Black & Decker earlier this week, leading many investors to wonder if it's time to pony up for a rebound or just hang on.
Sears is still the most dangerous stock on Wall Street, and if you own it, you're gonna get hosed… if you haven't been already.
Clicks and Mortar, Not Bricks and Mortar
On Jan. 23, 2015, I called Sears one of the "five scariest stocks on Wall Street" and urged you to give it a wide berth or short it outright.
It's dropped more than 73.64% since I recommended shorting it and is trading at a stunning 5% of its stock price exactly 10 years ago.
I know Sears is an iconic brand, but these days that's not enough.
The company is hemorrhaging red ink.
…sales are in decline and have been for years. Things are so bad that Sears lost $1.6 billion during the first three quarters of last year, which is triple the loss a year earlier in 2015. Gross margins have fallen another 2.5% even as operating expenses continue to rise. Comparable sales are plummeting.
…the company has closed more than 2,500 stores over the past six years and recently announced plans to shutter another 150 Kmart and Sears stores. As of November 2016, Sears had 550 stores with leases expiring within the next few years, according to CFO Jason Hollar in a Fortune interview. Every one of them is on the chopping block.
…Sears is dogged by persistent bankruptcy rumors, based on – among other things – a staggering $4.46 billion debt load.
It's only a matter of time before Sears goes the "way of the dodo."
The dodo's last recognized sighting was in 1662, when it had been hunted literally to extinction. Fat, clumsy, and unable to fly, the only known remains are a head and some tissue brought to Europe in the early 17th century and dissected at the Oxford University Museum in the 19th century.
The reason I'm bringing this up is that Sears is a lot like the proverbial dodo.
The once iconic American retailer badly misjudged the shift to online shopping and away from traditional retailing that had been its domain almost exclusively since 1893, when it was founded by Richard Warren Sears and Alvah Curtis Roebuck in Chicago. Executives continued to believe that Sears was something special when, in fact, consumers gave up that notion years ago and viewed it as just another place to shop… and not a very good one at that.
CEO Eddie Lampert, a Wall Street financier once rumored to be the next Warren Buffett, took the helm at Sears in January 2013. He's rumored to have lent the company at least $1 billion in successive attempts to resurrect the brand and turn it into an "asset-light comp…
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.