On July 6, Sears Holdings Corp. (NASDAQ:$SHLD) shares took a plunge as the recent rally that held up the stock stumbled to a halt amongst pessimistic reports about the company and the entire department store sector.
Sears stock was down 8.4% as of 12:23 EDT.
Most retail investors are aware that Sears shares have become extremely volatile as of late as the stock increased almost 50% over the course of eight trading sessions at the end of last month. However, those gains seem to be coming to an end as there was little reason for the rally in the first place.
CreditSights, a research firm, gave Sears a 20% chance of defaulting in the coming year. The firm also added that the company is being held up by a combination of asset sales and loans from CEO Eddie Lampert’s hedge fund. Additionally, Sears’ debt is trading at a considerable discount.
Additionally, investors have become discouraged by the outbreak of retail bankruptcies. The latest victim is True Religion, a clothing company, who filed for Chapter 11 earlier in the week.
It’s likely that Sears stock will remain volatile as speculators and backers, including board members Bruce Berkowitz and Lampert, come in occasionally and pump it. However, bankruptcy seems unavoidable for the retail-store company. In fact, Sears has already sold most of it’s like Lands End and Craftsman tools. Unfortunately, the stock is heading in the direction of zero, and it’s not a matter of ‘if’ but ‘when’.
Featured Image: twitter
