NEW YORK (TheStreet) -- Shares of Sears Holdings Corp. (SHLD) are down by 3.46% to $27.03 in early afternoon trading on Friday, as the stock continues to decline following yesterday's negative analyst note from Credit Suisse, suggesting the company should liquidate its assets.
The struggling department store will receive a $400 million loan from the hedge fund of its CEO Eddie Lampert, which is enough to keep Sears afloat for three months, but the company will need 10 times the capital if it wants to last another two years, Bloomberg reports.
Sears realized more than $6 billion in losses over four years, and will run out of cash in 2016, unless it gets at least $4 billion of new capital, Fitch Ratings said, according to Bloomberg.
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Sears has been dealing with a decline in consumer spending in its department stores as customers tend to do their shopping online.
The company may have to sell additional debt and divest assets if it hopes to reach Lampert's objective of cutting costs, while investing in rebuilding its brands, Bloomberg noted.
Separately, TheStreet Ratings team rates SEARS HOLDINGS CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate SEARS HOLDINGS CORP (SHLD) a SELL. This is driven by a few notable 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 deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 195.4% when compared to the same quarter one year ago, falling from -$194.00 million to -$573.00 million.
- The debt-to-equity ratio is very high at 8.41 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 0.17, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. 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 21.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.15% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$187.00 million or 9250.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: SHLD Ratings Report