Sears Holdings Corp (Nasdaq: SHLD) is still struggling to stay afloat by cutting costs and closing stores, but there have been few signs that the effort is working. Instead, some investors are preparing for Sears to eventually disappear all together, and UBS says the lion’s share of Sears’ remaining business could go to just three other companies.
According to UBS analyst Michael Lasser, location and product overlap suggests Home Depot ( HD), Lowe’s Companies ( LOW) and Best Buy Co. ( BBY) would get the majority of Sears’ remaining appliances, home improvement and electronics business.
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Sears’ revenue is down more than 60 percent in the past decade, but its remaining $11 billion in annual revenue could soon be up for grabs.
Sears is closing another 103 stores in the first few months of 2018 after closing 358 stores in 2017, but it was still currently operating around 1,100 stores as of the end of the last quarter. UBS estimates that roughly 80 percent of those stores are with a 15-minute drive of a Home Depot, Lowe’s and/or Best Buy location.
While Amazon.com ( AMZN) and other online competitors are often blamed for the downfall of legacy brick-and-mortar retailers like Sears, Lasser says the bulk of Sears’ remaining businesses aren’t the types that are typically vulnerable to online disruption. Instead, those sales would likely go to other local brick-and-mortar stores.
If Sears were to close all its remaining stores (which it has given no indication it will do any time soon) UBS estimates Best Buy would get a 2.5 percent boost to same-store sales and a 10 percent boost to earnings per share. UBS estimates Lowe’s would get a 1.7 percent same-store sales boost and a 4 percent EPS boost. Home Depot same-store sales would rise 1.4 percent, and EPS would increase 2 percent.
As far as the 2018 outlook for Sears itself, Lasser is not optimistic.
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“With interest rates set to rise and corporate tax reform not benefiting SHLD, as it’s not profitable, we think its woes will only accelerate going forward,” Lasser says, according to CNBC.
Even after closing its least profitable stores, Sears’ same-store sales dropped 15.3 percent in the most recent quarter after dropping 11.5 percent in the previous quarter. Sears has reported $11 billion of losses in the past seven years and reported $4.4 billion in debt as of the end of October.
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The Sharks Are Already Circling a Wounded Sears Holdings Corp (SHLD) originally appeared on usnews.com
