Thursday, September 18, 2014

Sears ... Is the End Near? ... Is the Fat Lady Getting Ready to Sing?

Sears, JC Penney and Montgomery Wards were once upon a time, and not so long ago, the big three of retailing. Kmart was number four and Radio Shack was an up and comer. Not so today.

JC Penney is on the ropes, Wards went broke, Radio Shack is about broke, Kmart was swallowed up by Sears and now Sears looks like it may well be a goner too.

Sears: The End? has the forecast of Sears demise:

"Credit Suisse analysts Gary Balter and Andrew Kinder think it’s time for Sears (SHLD) to start winding down:

Let’s face facts. Sears is generating negative operating cash flow of between $1 billion and $2 billion (closer to upper end, it looks like) in 2014. Unless it sells off real assets while somehow maintaining the cash flow from those assets, this story is not likely to have a happy ending, and that ending continues to depend on suppliers… 
At least, the bulls argued, Sears still has access to all of its real estate, give or take the 125 Sears locations in its insurance subsidiary. However, that changed significantly with the $400 million effectively seasonal financing backed by ESL and secured by 25 locations. All of a sudden, as a vendor, one has to ask if cash flow is that tight that ESL needs to lend the money. And why is it taking first dibs on so-called valuable real estate if that was what the vendors had counted on if things further deteriorate?… 
That seems bad for the vendors and for those bulls who continue to argue that the asset value is greater than the stock. We are not sure about that, but we are pretty sure that is not the case if the shareholders can’t get those assets. While we don’t know where that will end, we end with the same argument we have been using for years now. If the assets are worth that much, liquidate, as operating is taking over $10 a share of value away every year."
Summing Up

Is the end finally near for Sears?

That's up to what its customers, owners, suppliers and employees decide to do, and that's just as it should be in a free society.

Of course, that's the free market at work, and we could use some market oriented freedom of choice for such government controlled institutions as the postal service, K-12 and the issuance of vouchers, and making colleges less costly while providing a better educational experience as well.

And while we're at it, let's teach our youngsters about the dangers of debt, especially when taking it on at an early age.

Because free choice for individuals and value for money is precisely the way things should work in a prosperous and free market based society.

At least that's my simple 'government bureaucrats and allied elitists won't save us or even generally act in our best interests' take on things.

Thanks. Bob.

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