Only in Obama’s Growing Economy: Sears & Kmart MAY Close Doors

Moody’s analysts say Sears and Kmart don’t have enough money — or access to money — to stay in business.

In a note published Wednesday, the analysts downgraded Sears’ liquidity rating, saying the company is bleeding cash and will have to continue to rely on outside funding or the sale of assets, such as real estate, to sustain operations.

“We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody’s to be approximately $1.5 billion this year,” the analysts wrote.

Kmart in particular is at risk of shutting down, according to Moody’s.

“The ratings… reflect our view on the uncertainty of the viability of the Kmart franchise in particular given its meaningful market share erosion,” the analysts wrote.

Sears said in August that its cash and equivalents have fallen to $276 million from $1.8 billion one year ago.

As a result, the retailer was forced to accept $300 million in financing from Sears CEO Eddie Lampert’s hedge fund, ESL Investments, in the most recent quarter.

The company is losing cash as sales plunge at its namesake and Kmart stores.

Net sales fell 8.8% to $5.7 billion in the second quarter. Same-store sales plunged 7% at Sears stores and dropped 3.3% at Kmart stores.

This could have an impact on the local shopping and sales tax revenue generation in Nevada County.  I suspect we will see a lot more Nevada County citizens shopping in WalMart, Costco and RC Willey  in Rocklin and Roseville. Too bad that Costco pulled out of Auburn. Placer County is putting Nevada County leaking sales tax to good use, improving roads, building parks, expanding infrastructure, and welcoming businesses.  Nevada County not so much.

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About Russ Steele

Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.
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3 Responses to Only in Obama’s Growing Economy: Sears & Kmart MAY Close Doors

  1. Russ says:

    Grass Valley Kmart is not on the December closing list. Full list is here:
    http://www.msn.com/en-us/money/companies/is-your-local-kmart-store-closing-heres-the-full-list/

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  2. Stu says:

    It’s ironic in a way, Sears, Roebuck & Co. was the Amazon of the early 20th century,

    For those of us who grew up in the more rural parts of the country the catalog, Craftsman tools and Kenmore appliances (I still have 20+ year old Kenmore Fridge, washer and dryer) were the stars – heck, you could even order houses and they would be delivered to your site – complete with step by step instructions!

    It would be an interesting exercise to plot a time line of revenue against press releases for the last 25 – 50 years

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  3. Russ says:

    Sears and Kmart closing will also increase online sales. The most recent Nevada County Sales Tax report notes that Amazon is having a big impact on department store sales.

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