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Sozzi Says Sears Needs Cash, Notes Empty Wall Syndrome, Layoffs

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In a report published Monday, Belus Capital Advisors CEO and Chief Equities Strategist Brian Sozzi examines the "plainly obvious" cause for numerous Sears Holding (NASDAQ: SHLD) stores to close. Sozzi writes that Sears "desperately needs cash on its balance sheet."

Following the 2013 holiday season, Belus Capital summarized significant points regarding Sears and Kmart closures. Brian Sozzi noted that many stores are being exited prior to lease expiration with liquidation sales beginning on February 9. The strategist added that Sears is exiting thriving malls and questioned if Sears would like to remain a national retailer with the devastating balance sheet. Sears Auto Centers (SAC) are also closing, a fact which tends to confuse investors, as SAC was supposedly the "integral asset that is being sought to generate cash."

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Sozzi criticized the company's spokesmen on the "opportunity" for displaced workers to search for jobs at remaining Sears stores. After researching employees Facebook pages, Belus Capital Advisors reported that workers "will seek employment for months instead of driving the extra distance to reach a Sears or Kmart continuing to be in operation for a minimum hourly wage and 20 hours a week. Moreover, the economic conditions surrounding the closed stores are such that finding new places of employment are not so easy, especially if one has spent 30 years at Kmart."

The strategist emphasized three main points regarding the company's frantic need for cash. Sozzi remarked that cash would aid in alleviating supplier concerns, raise liquidity from underperforming assets, and imply to investors that Sears could fund a turnaround. Aside from this desperate need, Belus commented that with more data gathering from consumers and workers, "I think the state of the stores is worse than previously believed."

Brian Sozzi emphasized abandoned, unproductive space throughout Sears stores. The "Empty Wall Syndrome" and severe lack of inventory stocking the shelves is a "recipe for customer disappointment and lost traffic." Throughout his article, Belus included photos and video of depressing shelves, abandoned photo studios, and water damage in TV areas with numerous electrical outlets.

Shares of Sears Holding Corporation closed at $38.15 on Friday and is currently down 1.36%.

Latest Ratings for SHLD

DateFirmActionFromTo
Jun 2018SusquehannaTerminatesNegativeNegative
Dec 2017Moffett NathansonInitiates Coverage OnSell
Feb 2017SusquehannaInitiates Coverage OnNegative

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StockFirmActionPT
NIUDaiwa CapitalInitiates Coverage On41.5
QMCONorthland Capital MarketsInitiates Coverage On12.0
IBKRJefferiesInitiates Coverage On89.0
MRETFTD SecuritiesDowngrades18.5
SWKSGoldman SachsDowngrades135.0
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