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The Short Case For Sears Holdings Corporation : An Incredible Disaster Before 2019...

|Includes: Sears Holdings Corporation (SHLD)

SEARS HOLDINGS has been discussd and subject to many controversal discussions from many years.

If you look at the evolution of the share, and its financial statements it looks as un incredible disaster...

History :

When E. LAMPERT takes the heading of SEARS Holdings, the company was :

- profitable ( 6$ share , more or less)

- total equity about 10Mds $

- revenue about 50 Mds,

Thus, it was a company in good health...

Maybe the SEARS supermarkets were old-fashioned, old, and so on : not so a big problem in fact....

From 2007 to end of 2009, the company has been always profitable ( even in 2008!, which a very difficult year for all companies).

Evolution of SEARS HOLDINGS.

To improve the business , i think two solutions were possible :

Solution 1: improve buildings and organize segmentated business,

SOlution 2 : make the modification decided by E. LAMPERT ( Shop Your Way, spin-off, buy-out, etc...)

Estimation and analysis of the two solutions

Solution 1.

If we estimate the costs of this solution , we can probably estimate:

- that improving the supermarkets building would involve a cost of 2M§/building, so an estimation of 1Md $ for the whole buildings ( 500 buildings more or less).

- improving the organization of the in SEARS Holdings : about 1 Md$

The total estimation for this improvement could be 2Md$.

Solution 2.

In my point E. LAMPERT has more or less managed SEARS as a hedge fund :

- spin-off,

- separation of different business,

etc,

Creating Shop Your Way and close slowly shops seems to be a big mistake.

Because of the way , customers are shopping, there are moving slowly to online shopping.

Thus, it a very long solution term and it is in this case very difficult to close shops, than can be estimated to more 10 years.

Up to date overview of the SEARS HOLDINGS situation.

As seen in my title , i think the situation is an incredible disaster that will occur before 2019 :

- revenues are in 2015 22Mds$ vs 50Mds in 2007,

- net income are in 2015 -1Mds $ vs 600M $ in 2007,

- totale equity are - 2 Mds in 201 vs 10 Md $ in 2007,

The impossibility to improve the business.

In 2012, the revenue coming from Shop Your Way, was about 1.8 Mds $, which represents less than 10% of the SEARS customers.

As SEARS decided to close shops in 2015, it is evident than about 90% will no more buy to SEARS : at best, all online customers can continue to buy to SEARS.

Thus, the revenues will fall very quickly in 2016.

I don't agree, in this case that SEARS will become profitable in 2016, as SEARS seems to be sure , because :

- important fall of revenues,

- restructuration of the company,

Fatal Issues for SEARS

Regarding all these facts, it is evident that SEARS will go to bankrupt very quickly.

SEARS can be main tained more or less 1 to years by selling its properties ( the only one assets that can be saved in SEARS).

That's why SEARS decided to write on agreement for the saving of its properties.

The agreement can be very surprising for shareholders, as SEARS , thanks to E. LAMPERT in its last letter said that everything was on track!!

By selling its properties, 2Mds $ of cash will be obtained and will permit SEARS to be maintained for 1 or two years.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.