Is There Any Way To Stop Sears Holdings’ Death Spiral?

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By J Maslow

searsIf you are over the age of 30, you probably remember how dominant Sears Roebuck used to be. Sears was one of the premier department store brands in the United States. It appears that almost every major American city had at least one Sears department store. In fact, Sears main claim to fame is that revolutionized catalogue shopping. It was the Amazon of the offline world.

Well, Sears (NASDAQ:SHLD) definitely has seen better days. In recent years, the company has been struggling really hard due to changes in consumer taste, as well as the gradual gravitation of most consumers to online retailers like Amazon. Sears is suffering precisely for the same reasons why malls are shutting down in the United States. People are buying less and less stuff in an offline setting. Increasing numbers of consumers prefer buying products online. This is why Sears has been caught in a downward spiral of simply spinning off or selling valuable assets.

The interesting thing about Sears is that it owns a lot of land in very lucrative real estate market. This is why a lot of stocks were ecstatic when the company publicized plans to sell its real estate holdings to a real estate investing trust (REIT) and lease the property back. This is the same kind of share value maximization strategy pursued by activist shareholders of Darden Restaurants which owns the Green Olive Chain.

It remains to be seen where this would boost Sears stock on a sustainable basis. I suspect that it won’t. I suspect that it would just lead to a temporary upsurge in value. The reality is that Sears is in a downward spiral and it definitely needs to try something infinitely bolder than the REIT strategy. Perhaps, its future is online and also on mobile devices.

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