NEW YORK (TheStreet) -- Shares of Sears Holding Corp. (SHLD) are up 0.85% to $38.01 in early morning trade after it was reported that Sears Canada may avoid liquidation, according to the New York Post.
An auction of the struggling department-store chain has attracted the interest of Kaluzny's Sycamore Partners, a prolific private-equity firm known for scooping up distressed store brands, the Post said.
Sycamore, which recently bought Jones Group, Talbots and Hot Topic, is considering a bid for Sears Canada with a plan that could include "running the business," sources told the paper.
While Sears CEO Eddie Lampert has signaled he wants as much as $2 billion for the 176-store chain, he is said to be considering lower offers, the Post noted.
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 several 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 generally disappointing historical performance in the stock itself."
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 44.1% when compared to the same quarter one year ago, falling from -$279.00 million to -$402.00 million.
- The debt-to-equity ratio is very high at 3.92 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 0.18, 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 23.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.10% trails that of the industry average.
- The share price of SEARS HOLDINGS CORP has not done very well: it is down 16.71% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full analysis from the report here: SHLD Ratings Report