What does the future hold for Sears (SHLD, Financial)? Whatever it is, it doesn’t look very promising, and would-be investors might be wise to wait and see.
Last week, Sears denied it was planning to close more than 100 – 116, actually – Sears and Kmart stores, leading to the layoffs of more than 6,000 employees. An email from a Sears spokesman to the Associated Press disputed the number of stores and which ones would be closed but otherwise refused to comment on shutdown plans.
More clarification came during the weekend. It was reported that Sears actually would be closing 77 Sears and Kmart stores, cutting 5,300 jobs, and that most of this would be accomplished before Christmas, the biggest retail holiday on the calendar.
That was better but far from ideal. Worse news – for both Sears employees and Sears stockholders – was yet to come.
In still-sketchy details that emerged today, it was reported that 131 Sears and Kmart stores, a Kmart distribution center and a Sears product repair facility will close their doors between November and January – and many will shut down before Christmas. Currently, more than 7,000 employees will be laid off, and that number could go higher still.
Actually, the number may depend on whether Sears stores and Sears Auto stores at the same location that are closing at the same time are counted as two stores or one. Sears lists them separately. Most of the Sears Auto outlets – which tend to be either physically connected to the main Sears stores or located close by – that are being closed will shut down when the main Sears stores with which they are linked shut down, but a few reportedly will close while the main stores remain open at least through the holidays.
The methodology for counting the affected stores goes a long way toward explaining the discrepancy; consequently, it may not be quite as bad as it appears today, but it seems all but certain that it won’t be as good as it seemed last week. Sears’ gross profit, as GuruFocus’ Sheila Dang observed earlier this month, “has been steadily declining since FY 2007.”
At the close of trading today, the price of a share of Sears stock was down 1.64%, selling for $38.33.
Bruce Berkowitz (Trades, Portfolio) is the only guru on record as having purchased shares of Sears stock since the summer, having bought more than 1 million shares last month. Berkowitz twice purchased shares in September, bringing his total stake in the company to more than 25 million shares; he also purchased more than 250,000 shares in March. Guru Murray Stahl (Trades, Portfolio) purchased about 1 million shares in March and added another 700,000 shares to his portfolio in June.
Gurus Chuck Royce (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) sold all their holdings in Sears in June, as did Paul Tudor Jones (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) in March.
