Sears Gets Temporary Respite Through Asset Sales

Sears HoldingsSears and Kmart brand stores owners’ Sears Hldgs Corp (NASDAQ: SHLD) reported in the 2nd quarter of the fiscal year 2016 a swing to a loss when compared with the last year’s profit for the same period. ESL Investments Inc. has provided debt finance of $300 million to this company.

If you consider the competition which retail stores are facing from the e-commerce companies, you will find that the investors are somewhat bearish about the company’s future growth. Still, we are hopeful that the company’s share price will increase for the short term period because of the reasons mentioned below. In the last trading session, Sear’s share prices closed at $10.99.

An Illinois-based company; The Hoffman Estates has reported a net loss of $3.70 per share or $395 million on total revenue of $5.66 billion in the second quarter. Last year in the same period, Sears had incurred a total income of $1.84 per share or $208 million on revenue of $6.211 billion. The company’s gross margin dipped from 0.9% to 22.2% on year to year basis.

Sears

With the quarter ended in July 2016, the sale of Kmart stores fell by 3.3%. In the similar period, the same-store sales of Sears dipped by 7%. The investors are more concerned about the decline in the sales of the same store over the loss incurred by the company in the second quarter. Since 2012, the company has sold every type of assets, particularly real estate and raised a whopping sum of $5.8 billion for funding the operations. Another $1 billion was raised by the company by selling its subsidiaries like for example Land’s End, Sears Hometown and Outlet Stores and Sears Canada. The investors are concerned about the cash which the company is spending at an alarming rate.

There is only $270 million in cash remaining with the company at the end of second quarter. In this particular context, the founder of Fairholme Capital Management, Bruce Berkowitz who has joined Sears Holding’s board in the year 2016 has advised for the sale of much important company’s assets like for instance Kenmore, DieHard, and Craftsman brand names. He has further suggested the sale of Sear’s home service unit.

According to a recent report, it is found that for the Craftsman business the company has received interest from the buyers. It is expected to generate a whopping sum of $2 billion from the sale of the brand. It is estimated that the money will be instrumental in funding for the company’s operation next year. The funds generated from the sale will come as a breather of relief for the company. The stocks are likely to recover in the short period. This is evident from the chart where it establishes a relationship between free cash flow and share prices of the company. If the money is flowing, the stock prices will increase in due course of time.

Sears Holdings Share Price v Free Cash-flow: October 19th 2016

Sears Holdings Share Price v Free Cash-flow: October 19th, 2016

The momentum indicator has developed positive divergence with price. You can expect the trend reversal to happen once the momentum indicator turns up.

Sears Holdings Stock Price: October 19th 2016

Sears Holdings Stock Price: October 19th, 2016

So, if you are a Binary trader who trades Binary Options market and anticipating an increase in the price of shares, you may place a bet on one-touch “Call” Option.

Just make sure that the target price does not exceed more than $12. Apart from that, the validity of CALL Option should be available for at least 30 days from the investment date.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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