Here's Who Benefits The Most If Sears Goes Bankrupt
According to Simeon Gutman of Morgan Stanley, if Sears Holdings Corp (NASDAQ: SHLD) were to “go away,” Home Depot Inc (NYSE: HD), Lowe's Companies Inc (NYSE: LOW) and Best Buy Co Inc (NYSE: BBY) stand to benefit the most, while J C Penney Company Inc (NYSE: JCP) and Gap's (NYSE: GPS) Old Navy brand will benefit to a lesser degree.
According to Gutman, Home Depot and Lowe's could see a 2 percent to 3 percent comp lift, while Best Buy could see a 4 percent to 5 percent comp lift over a few years. On the other hand, given Sears' 2.1 percent apparel market share, benefits to apparel competitors will likely be small.
The analyst also notes that J C Penney and Macy's, Inc. (NYSE: M) have the greatest real estate overlap and that if Sears customers could afford to shop at Macy's, they would have already been doing so.
“The caveat to this analysis is if Sears decides to sub-lease store locations to another apparel retailer (most likely Primark),” Gutman argued. “In this case, we see Sears potential demise as a net negative to the overall apparel market given Primark's competitive positioning.”
The analyst concludes by stating that the timing and magnitude of possible benefits could differ based on the actual outcome if Sears files for Chapter 11 bankruptcy protection, subleases stores to other retailers or simply closes stores more aggressively en route to a liquidation.
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