Taking The Shears To Sears

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What's going on?

Shares of US department store Sears plummeted 10% on Thursday the companys first-quarter results made for grim reading as sales dropped by 30% and it made a loss overall.

What does this mean?

Brick and mortar retailers have struggled to deal with the threat of ecommerce, leading to several bankruptcies. And while Sears is still growing in some categories namely apparel, footwear and jewelry its becoming harder to sell things like car parts, electronics and furniture.



Following sales declines for the last six and a half years, Sears is strapped for cash its got just shy of $190 million left in the bank (compared to $17 billion in sales last year) and is looking for ways to keep the company afloat.

Why should I care?

For markets: Turning around struggling retailers is tough.


Sears has identified 100 of its near 900 stores that are losing it money it plans to shut three-quarters of them and is considering selling off some of its other brands (like Kenmore) to raise money. Investors may worry that an unsuccessful attempt to shore up the company could see it file for Chapter 11 (a.k.a. bankruptcy protection). This puts Sears bondholders in control of the company (instead of shareholders) theyll likely sell off what they can to recoup their investment.



The bigger picture: Its not all bad news.


Store closures can be great for consumers everyone loves a closing down sale. Competitors win too, gaining sales where old stores have closed. Macys is in the grips of successful turnaround its stock rose 10% earlier in May on the back of a strong first quarter. Macys shares are up over 30% so far in 2018, showing signs of a company getting back on the right track.

Originally posted as part of the Finimize daily email.

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