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Despite Sears Holdings& # 39; (NASDAQOTH: SHLDQ) Reduced relevance over the past decade, its bankruptcy will always create disruptions in the world of retail. Sears plans to continue operations, at least for a while, but its business will be much smaller. President Eddie Lampert intends to dispose of almost all of the company's most profitable stores, with the exception of about 400. This means that the customers who bought these stores are going to look for another place to go.
Products such as home appliances, consumer electronics, computer equipment, as well as lawn and garden equipment remain Sears' best-selling sales, generating a $ 1.4 billion sales figure. dollars the previous quarter, while clothing and household goods smoothly generated $ 700 million. Listed below are retailers in a variety of categories that can make the most of Sears' disappearance and the most affected group.
Source of the image: Getty Images.
Appliances
Even though the prestige of the Kenmore brand has declined over the years, its home appliances have always helped Sears become a destination of choice for home appliance buyers. Lowe & # 39; s (NYSE: LOW) became the largest appliance retailer in 2013, followed by Home Depot and Best buy. The latter surpassed Sears to become the third largest appliance retailer in 2017.
But it is possible J.C. Penney (NYSE: JCP) that's what stands out best. He brought appliances back two years ago, after 33 years of absence, and thanks to his 300 shopping centers shared with Sears, buyers could migrate to his stores.
Some analysts believe that Sears' store closures could actually hurt J.C. Penney because the presence of a "dark anchor shop" could result in a decrease in traffic in shopping centers. This could be the case if it was a Macy & # 39; s or target store that was closing. However, it is doubtful whether Sears has generated much traffic to these malls anyway.
Equipment
Sears sold its Craftsman tool brand to Stanley Black & Decker (NYSE: SWK) last year, for $ 900 million, but reached an agreement allowing it to collect royalties for a period of time on all sales of Craftsman tools generated by Stanley. The agreement also allowed Sears to continue to manufacture and sell Craftsman tools without paying royalties for 15 years.
Such sales will likely be insignificant in the future. But Stanley recently announced plans to supply Lowe with Craftsman tools. These sales could increase, now that competition from most Sears stores will be eliminated, giving Stanley a boost.
Clothing
Analysts at Cowen & Co. estimate there are 740 Walmart shops and 583 Target stores within a five-mile radius of a Sears store, as well as nearly 1,400 stores owned by Companies TJX, be it a Marshalls, T.J. Maxx or HomeGoods. Everyone should be able to pick up customers.
However, it is J.C. Penney (with Walmart and BurlingtonWho has the best chance of winning in the apparel market, as the Penney customer profile best fits the Sears customer. Also, since J.C. Penney earns about half of his income from the sale of clothing, it is possible that the retailer will achieve the best result here. The proximity of the shopping center stores of both companies also bodes well for J.C. Penney's apparel industry.
Shopping centers
Even malls can benefit from the closure of Sears stores. She often paid below-market rates on her properties, and shopping centers that divide empty Sears stores can earn much more rent for new tenants.
Trust in real estate investment Seritage growth properties (NYSE: SRG) did it with many of the hundreds of properties she acquired from Sears when it was split. While Sears was paying about $ 4 per square foot, Seritage was able to get an average of over $ 17 per square foot from new leases. Seritage has consistently distanced itself from Sears since its inception and nearly 70% of its contract rental income now comes from tenants other than Sears Holdings.
The biggest loser
It's easy to see Sears workers and retirees as the real losers of Sears' bankruptcy as they risk losing their jobs or losing their benefits if the Federal Pension Benefit Guaranty Corporation (PBGC) pays for their pensions. . Although the basic benefits of retirees are protected since they are below the maximum levels guaranteed by the PBGC, health and welfare benefits, life insurance, vacation pay, allowances dismissal and certain lump-sum and disability benefits are not covered.
Lampert eliminated the pension risks of approximately 71,000 retirees by transferring just over $ 1 billion in pension MetLife. He also paid more money into the Sears Holdings pension plans in the last few years before the bankruptcy. A portion of the proceeds from the sale of the Craftsman tool brand has also been pledged to pension plans, but it is unclear whether the recent bankruptcy filing will have an impact.
While some vendors are feeling the pinch, most have witnessed the demise of Sears Holdings and planned their operations accordingly. Manufacturer of appliances Electrolux Sears is Sears' eighth largest creditor, with $ 18.6 million in unsecured receivables, but the impact will be negligible, although Sears accounts for 10% of sales of its major appliance in North America. Similarly, whirlwind Sears would expect it to eventually go bad. Although he is Sears' seventh largest creditor, with $ 23.4 million in unsecured receivables from Kenmore home appliance manufacturing, he has withdrawn his own brand from Sears stores. ;last year.
The key to take away
The loss of the iconic retailer is not a reason to celebrate. And while many Sears injuries were self-inflicted, the challenging trading environment also contributed to his demise.
Nonetheless, a failing company like Sears is wasting resources and capital, and bankruptcy may mean that others, who are currently in the workings – like JC Penney – can now grow stronger and perhaps even prosper. .
Rich Duprey has no position in the mentioned actions. The Motley Fool offers the following options: short February 2019, $ 185 calls on Home Depot and long calls from January 2020, $ 110 on Home Depot. The Motley Fool recommends the companies Home Depot, Lowe's and The TJX. Motley Fool has a disclosure policy.
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