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Will You Take $2 Billion for Those Stores? Oh, and Throw in That Swimsuit

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Another quarter has closed and it’s more of the same for poor old Sears Holdings. Revenue fell 9.7% year-on-year, tumbling to $8 billion. Same-store sales dropped 0.8% YoY. Net profit was a net loss – of $573 million – during the fiscal quarter that ended Aug. 2.

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The company reportedly burned through $747 million in the most recent quarter.

Go back and read that last sentence slowly. $747 MILLION…Poof!

The Barron’s story headline read: “It’s Still Sears, Where America Doesn’t Shop,” and based on the retailers results over the past few years, few people even drive slowly past a Sears or Kmart store.

“Sears has few good options at this point. It’s hard to see how they remain a viable operating entity,” said Matt McGinley, an analyst with ISI Group, of the second quarter results.

Very hard.

“Given the high burn rate, Sears is looking for funding beyond its $829 million of cash and equivalents,” Barron’s reported. “Earlier this year, it received a $500 million payment from Lands’ End prior to the spin-off. Sears laid out a number of options, including selling its 51% stake in Sears Canada, its auto-center operations, or real estate.”

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Or, others offered, it could issue commercial paper or borrow against debt.

“Over the next six to 12 months, we intend to work with our lenders and others to evaluate our capital structure with a goal of achieving more long-term flexibility, and may take other actions as appropriate,” said CFO Robert Schriesheim in a news release.

“But none of those moves solve the company’s huge problem: Its operations are losing money. Unless that changes, proceeds from asset sales will merely plug operating losses,” Barron’s concluded.

We have to start thinking ahead, so it’s time for idle speculation: If Sears Holding puts its auto-center operations on the block, who is the buyer?

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There are some 700 stores (at least that’s what Sears’ website claims), so it’s not a small operation. By most accounts, the auto centers hold their own in the market; they’re not setting any records, though, and recent marketing moves and national TV advertising haven’t seemed to matter.

Consider, too, that many of those locations are physically attached to Sears stores and most of those are attached to shopping malls; neither are considered hot shopping destinations, so where does a decent car count come from? And if Sears Holding moves to cash out on real estate, what becomes of the auto centers?

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That’s just on the surface. Considering deeper scars from legacy costs, pension obligations, outstanding debt, etc., etc., etc., you’re looking at a huge outlay even after writing a really large check to make the acquisition.

What companies do you think would tackle that mess? Doesn’t have to be directly tire related? I’m interested in your thoughts – hit me at [email protected] or in the comments box below.

* * * * * * * *

Because it was apparently a slow news day, Reuters felt obliged to offer a list of 10 things one should never buy used.

If you’re like me, when trolling a garage or yard sale, you make those decisions rapidly as you stroll by. Hand tools? Yes. Shoes? No. A scratch-free copy of “Meet the Beatles”? Heck YES!

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Reuters’ list of used no-nos included the obvious – underwear and swimming suits, make-up and laptops – and a few that one could argue, like baby cribs and car seats. Have you priced car seats lately? Yeow!

Coming in at Number 4? Used Tires. Reuters offered: “Even though used tires comprise 10% of tire sales in the United States – and estimated 30 million annually – buying used tires is a financial and safety risk not worth taking. Even if the tire passes the penny test and there’s no evidence of dry rot or cracking on the sidewall, it still could have internal damage if it’s been overloaded, underinflated, or involved in an accident. Also keep in mind that you wouldn’t be notified of a tire recall if you bought the tires used.”

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