NEW YORK (TheStreet) -- Shares of Sears Holding Corp. (SHLD) are up 23.05% to $40.20 in pre-market trading after it was reported that the troubled retailer said it was exploring the conversion of 200-300 stores to a real estate investment trust (REIT) and offer it to shareholders through a rights offering to raise cash, according to Reuters.
The company was looking to monetize a portion of its real estate through a sale-leaseback transaction, it said in a regulatory filing.
Sears has been trying to raise cash to get it through the build-up to the year-end shopping season and it has repeatedly turned to CEO Eddie Lampert and his hedge fund, which together own 48.5% of Sears, Reuters noted.
Sears estimated flat comparable sales and an adjusted loss before interest, taxes, depreciation, and amortization of $275 million to $325 million in the quarter ended Nov. 1. The company will report results on Dec. 4.
As of Nov. 1, the company had about $330 million in cash and $234 million under its credit facility.
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 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