NEW YORK (TheStreet) -- Shares of Sears Holding Corp. (SHLD) are down 7.80% to $39.47. On Friday, the retailer said it was considering selling as many as 300 of its stores to a REIT as a means to generate much-needed cash, and the stock price soared Friday's market close. That ended today, Barron's reports.
The stock jumped 31% on Friday to $42.81, its highest closing price since April.
Wall Street's outlook on Eddie Lampert's struggling store chain has been bearish for some time. As of Oct. 15, the short position in the stock amounted to 65% of the float. Short covering could account for some of today's surge. There's also likely some profit taking, given that at one point Friday, Sears had climbed as high as $48 a share, Barron's said.
But Barron's and the New York Times both weighed in recent days. In this weekend's edition of Barron's, writer Vito Racanelli warned that a REIT spinoff of a retailer that has consistently negative cash flow "is a stretch." A day earlier, DealBook writer Kevin Allison argued that Sears's prospects remain dim, Barron's 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 a number of negative factors, 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