February 23, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Sears Holdings (Nasdaq: SHLD ) soared 20% today after the embattled retailer announced several steps to pay down debt and hopefully regain market share.
So what: Sears posted a nasty fourth-quarter loss of $2.4 billion, but management's decision to spin off some stores (Hometown and Outlet) and sell others (11 stores to General Growth Properties) is easing Wall Street's liquidity fears. "It is important to note that we are an asset rich enterprise with multiple resources that dash at our disposal, which we believe provides us with ample financial flexibility," CFO Robert Schriesheim said.
Now what: I'd continue to be cautious about jumping in. While the $1 billion management expects to raise will certainly help liquidity, the worrisome trends of same-store sale decreases, market share declines, and increasing competition continue to make Sears a questionable long-term opportunity. Of course, when you add the stock's torrid run-up in 2012, the decision to stay away is that much easier.
Interested in more info on Sears? Add it to your watchlist.