Why Sears Holdings Corp Stock Took a Hit Tuesday

What happened

Shares of brick-and-mortar retailer Sears (NASDAQ: SHLD) fell on Tuesday. The stock declined as much as 9.7%, but shares finished the trading day down about 6%.

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The stock’s decline comes as the company announced it was adding a restructuring expert to its board, implying bankruptcy is a possibility.

So what

On Tuesday, Sears announced it was adding Alan Carr, managing member and CEO of Drivetrain, LLC, to its board of directors.

“Alan brings deep experience as a director for companies that went through complex organizational change,” explained Sears chairman and CEO Eddie Lampert. “We are pleased to welcome him to the Board and look forward to the benefit of his expertise as we work to maximize value for the Company and its stakeholders.”

Carr, who has helped companies restructure during bankruptcies, comes to Sears during a tough time. A recent SEC filing by the Eddie Lampert-owned hedge fund, ESL Investments, asserted Sears is facing “significant near-term liquidity constraints.” Specifically, ESL said Sears will have to make a $134 million debt payment on Oct. 15.

Now what

Sears continues to face troubles, both when it comes to its debt and its sales. Sears Holdings’ second-quarter revenue was $3.2 billion, down from $4.3 billion in the year-ago quarter. Store closures, of course, were the primary driver for this decline. But total comparable store sales during the period were down as well, falling 3.9%.

Whether or not bankruptcy is in the cards for Sears remains unknown. But things aren’t looking good.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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