The Painful Decline Of Sears And Its Hedge Fund Owner Continues

Historic retail giant Sears has experienced a slow and steady decline in recent years.

Just last week, we reported the company saw a nosedive in its stock shares. Reuters further confirmed this, with a 16 percent decline. This raises further concerns for investors and stockholders still clinging onto hope that the big-box retailer will survive.

With $13.19 billion in liabilities, some are worrying about whether or not the company will be able to stock its shelves for consumers looking to buy gifts in the 2017 holiday season. One of the areas that has increasingly become an issue for Sears is the eCommerce landscape with giants like Amazon moving in on their turf.

Sears’ CFO Jason Hollar expressed hope for the company in a recent blog post. He said, “As 2016 proved to be another challenging year for most bricks-and-mortar retailers, our disclosures reflected these developments. While historical performance drives the disclosure, our financial plans and forecast do not reflect the continuation of that performance.”

But a recent report from The New York Times also shined light on the fact that ESL Investments, the hedge fund owned by Sears Holdings chairman and CEO Edward Lampert, is also facing financial struggles.

“It takes a retailer like Sears a long time to die,” Greg Melich, senior managing director and head of consumer research for Evercore, told the NYT. “It’s been burning through over a billion dollars in cash every year. That’s not sustainable.”

The report also noted that back in 2006, Sears Holdings shares were $162, but this week they are barely at $11. Sears Holdings remains ESL’s largest investment to date, with a 48 percent stake in Sears Holdings’ equity and 32 percent of its total long-term debt.

Over the years, ESL and Lampert have extended $800 million in loans to the retailer secured by assets, which the NYT pointed out is approximately two-thirds of Sears’ entire market capitalization of $1.2 billion.