NEW YORK (TheStreet) -- Sears Holdings Corporation
(SHLD) fell 13.74% to $36.72 at the close of the trading on Friday, down $5.85 from the previous close of $42.57. The stock had a volume of 10,339,635, well above its average volume of 1,367,940.
The drop coincided with Moody's Investor Service's downgrading of the stock to Caa1 from B3 after Sears' comparable sales fell 7.4% year-over-year for the quarter that ended on Jan. 6, 2014. For the fiscal year, Sears anticipates domestic Adjusted EBITDA loss between $308 million and $408 million compared to profit of $557 million the previous year. Moody's said it expects full year cash burn, after capital spending, interest and pension funding, to land around $1.2 billion in 2013 and anticipates Sears' cash burn to easily exceed $1 billion in 2014.
"Operating performance for fiscal 2013 is meaningfully weaker than our previous expectations, and we expect negative trends in performance to persist into 2014," said Moody's Vice President Scott Tuhy. "While Sears noted improved engagement metrics for its 'Shop Your Way' Rewards program, Moody's remains uncertain when these improved engagement metrics will lead to stabilization of operating performance."
TheStreet Ratings team rates Sears Holdings Corp as a Sell with a ratings score of D. The team has this to say about its recommendation:
"This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.51 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.12, which clearly demonstrates the inability to cover short-term cash needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Multiline Retail industry and the overall market, SEARS HOLDINGS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SEARS HOLDINGS CORP is rather low; currently it is at 23.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.45% trails that of the industry average.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Multiline Retail industry average, but is less than that of the S&P 500. The net income has decreased by 7.2% when compared to the same quarter one year ago, dropping from -$498.00 million to -$534.00 million.
- SHLD, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: SHLD Ratings Report
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.