Is Sears (NASDAQ:SHLD)’s Survival Strategy Good Enough?
The recent news of Sears (NASDAQ:SHLD) facing financial troubles, after a hefty loss of $975 million in addition to changes in consumer preferences resulted in further damaging the already drowning boat of Sears (NASDAQ:SHLD) . Sears (NASDAQ:SHOS) is a well-known American multinational department store chain. It is known for dealing in products like, clothing, footwear, bedding, furniture, jewellery, beauty products, appliances, house ware, tools, electronics as well as office and school supplies. Up until October 1989, Sears surpassed Walmart, Target, Best Buy and Home depot.
The company went bankrupt in 2014 and turned to its Chairman and CEO Eddie Lampert, who ensured a loan of $40 million. Half of this loan has already been handed over to Sears (NASDAQ:SHLD), while the remaining sum will be delivered by October this year. Also, as a last resort, Sears (NASDAQ:SHLD) has committed to selling its stakes in Canada, for an expected $380 million.
The company’s board gave in to offer rights of up to 40 million Sears (NASDAQ:SHLD) shares in Canada. Edward Lampert, chairman and CEO of Sears (NASDAQ:SHLD) is also in favour of this move. Sears (NASDAQ:SHLD) will hold on to about 12 million shares which are valued at $113 million.
Such measures came into play after Sears (NASDAQ:SHLD) was facing competition from retail giants like Walmart Stores. The recovery period after the recession has been slow for Sears (NASDAQ:SHLD) Holdings Corp which ran K-Mart. Consumers have also turned to online purchases, giving a significant edge to Amazon.
According to Chief Financial Officer Rob Schriesheim, the rights offerings, along with $500 million dividend of Lands’ End, another $165 million in proceeds from real estate transactions, and a $400 million loan will provide a hefty sum of $1.45 billion in liquidity to Sears (NASDAQ:SHLD). This is a significant amount and is expected to turn tables for Sears (NASDAQ:SHLD). But analysts wonder if lack of financial capacity is the only cause for Sears (NASDAQ:SHLD) decline.
According to research, the major area of concern for Sears (NASDAQ:SHLD) seems to be its lack of vision and strategies for future, ineffective management, and eagerness to strip off its valuable properties that companies normally hold on to. With all these failures aligned, Sears (NASDAQ:SHLD) seems to be slowly sinking. With the existing competition and ever changing demands of the consumers, Sears (NASDAQ:SHLD) needs an innovative plan in action. Even though they made an attempt to introduce a “Shop your way” loyalty program, but to date it has proven ineffective. At this stage what is expected of Sears (NASDAQ:SHLD) is to bring in innovation to their stores, products, and services. To cater to the customers of this era, Sears (NASDAQ:SHLD) should have been offering quicker delivery services, faster repairs and an introduction of a Microsoft centre. All this could have helped transform Sears (NASDAQ:SHLD) image.
But Sears (NASDAQ:SHLD) will see where it stands in the next 6 to 12 months in its capital capacity.
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Sears (NASDAQ:SHLD) plans to continue work in its Canadian stores for improvement after the rights offering are complete.