Decision by Sears to Sell Paint Won't Help the Troubled Retailer

Following last week's dismal fiscal second-quarter earnings release, Sears Holdings (SHLD)  said this week that it will begin selling paint again after a four-year hiatus.

Although this makes sense from a business standpoint, is it simply too late for Sears to try again?

Everyone is aware that brick-and-mortar retailers are facing challenges like never before. Americans remain budget-conscious following the Great Recession, and when they do spend money, it is usually online.

Led by Amazon, ecommerce has quickly revolutionized how people around the world shop.

Instead of hopping in the car and driving to the mall, Americans can simply sit down at their laptops or even use their mobile phones and purchase whatever they need. And Amazon's Prime service offers free shipping as quickly as two hours, in some markets.

This has hit the department stores particularly hard. Once-popular retailers Macy's, Nordstrom and Sears have watched their sales shrink and their stocks plummet.

Even apparel sales, which many pundits once thought were out of ecommerce's reach, have shifted online. Case in point: Amazon is poised to overtake mall stalwart Macy's in clothing and accessories sales as early as next year.

Once a stock that investors bet their retirements on, Sears has simply become one of the most toxic stocks.

Last week, Sears reported results that showed yet another quarter of plunging profits. The company posted a loss of $395 million for the quarter, revenue tumbled 10% and same-store sales plunged.

Sears never should have stopped selling paint in the first place.

The home improvement industry has remained robust, with Home Depot and Lowe's snagging most of the market share. Any entry into do-it-yourself markets such as paint sales could be a plus for Sears.

However, it may be too late. Unless Sears becomes an all-out hardware super store, the clock is ticking on this company.

Sears faces a massive debt hurdle of $3.4 billion, with just $276 million in cash. And without drastic improvements made to bring large amounts of customers back, it looks prime for a default.

At this point, the best thing that the company could do would be to sell off its assets. It has already begun to do so, spinning off apparel brand Lands' End in 2014, as well as packaging and selling some of Sears' real estate as a real estate investment trust, Seritage Growth Properties.

Sears has already hired Citigroup to help it find strategic alternatives for a couple of its brands, but Citi better hurry up.

The entire brick-and-mortar retail industry is on shaky footing, but Sears is among the most uncertain stocks in the sector. Investors should steer clear.

---

A crisis is coming. And when it hits, weak companies and their investors will be washed away. Don't let that happen to you. I've found seven companies you should own no matter what the economy is doing. Each one of these powerful, yet overlooked companies barely notices when the market tumbles. And they'll skyrocket when it rebounds. You can pick all seven up for pennies on the dollar right now. But that'll change the instant average investors catch wind of just how bad things really are. Get their names here before it's too late.

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Stocks

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz

PayPal Wants to Consolidate the World of Rewards Points

PayPal Wants to Consolidate the World of Rewards Points

Rising Oil Prices Will Be a Wash for U.S. Economy, JPMorgan Says

Rising Oil Prices Will Be a Wash for U.S. Economy, JPMorgan Says

Dow Tumbles as Trump Calls Off North Korea Summit

Dow Tumbles as Trump Calls Off North Korea Summit