Why Sears Holdings Corp. Shares Tumbled

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Apr 7, 2014 at 5:53PM
Consumer Goods

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

What: Shares of Sears Holdings Corp. (NASDAQOTH:SHLDQ) were falling today, down as much as 24% from Friday's close and 6.4% over the course after it completed its spinoff of Lands' End (NASDAQ:LE) over the weekend.

So what: Most of the loss in the share price comes simply from the separation of the clothing company, but Sears' slide over the course of the trading day indicated some bearishness following the sale. Lands' End shares also fell 0.4%, showing that shareholders aren't particularly interested in holding the former subsidiary, either. Even the spinoff itself itself seems to reflect Sears' failings as the market value of Lands' End, at $1.01 billion, is notably lower than the $1.9 billion Sears paid in 2002. In perhaps a lone bright spot, Sears received $500 million in aggregate gross proceeds from a cash dividend paid by Lands' End before the separation.  

Now what: For many investors, the struggling retailer is seen as an asset play, but with all of Sears Holdings' spinoffs, which have also included its Hometown and Outlet Stores and part of Sears Canada, the company's operational weaknesses become more apparent. The department-store chain has had combined losses of over $5 billion in the past three years and shows no signs of improving as sales continue to slide and consumers flock to online options and more modern retailers. With the current sell-off momentum in the market, I'd expect Sears shares to fall further.