If you have a macabre interest in watching a company struggle against an accelerating and almost certain demise, then you might find it satisfying to tune into the unraveling of Sears Holding Corporation (NASDAQ: SHLD ) . While I get no pleasure from saying that, as I've long been a satisfied customer of the 120-year-old company, there's no sense in denying the inevitable.
Sears' latest quarterly results, which were released by the company on Thursday, offer proof of Warren Buffett's admonition that "turnarounds seldom turn." For the three months ended Aug. 2, the retailer lost $573 million, burned through $313 million in cash (as measured by EBITDA), and saw its book value fall by 67% on a year-over-year basis. It was, for all intents and purposes, a bloodbath.
To be clear, Sears isn't giving up without a fight. During the first half of the company's fiscal year, the retailer generated $665 million in additional liquidity -- though most of it, $500 million to be precise, came from the spinoff of its Lands' End subsidiary earlier in the year. It's also continuing to "explore strategic alternatives" for its 51% interest in Sears Canada, a thus-far unfruitful endeavor that began almost a year ago.
Finally, the Chicago-based company isn't relenting in its efforts to "optimize" its store network -- that is, shuttering underperforming stores. During the last six months, it's announced the closure of approximately 130 locations, and said on Thursday that it "may close additional stores during the remainder of the year."
While it probably goes without saying, it seems increasingly clear that the question is no longer whether Sears will survive, but instead, when will it be forced to follow in the footsteps of Circuit City, Borders Group, and Linens 'n Things, among other now-defunct brick-and-mortar retailers, by seeking the so-called "protection" of the bankruptcy courts, a description I've never completely understood.
Sears' most acute problem is liquidity -- as is typically the case with a company in its position. It finished the quarter with $829 million in cash and equivalents. On top of this, it has $240 million remaining on a revolving credit facility, and is technically free to raise an additional $760 million in second-lien debt, though it's far from certain that creditors will be forthcoming with the latter in the event the funds are urgently needed.
Meanwhile, Sears has burned through upwards of $300 million in cash every quarter since the middle of last year. If it continues at this pace, in turn, it will have no choice but to try its luck in the credit markets at some point during the next few quarters. And it will be at that point, if not sooner, that investors will get a tangible sense of Sears' near-term ability to survive.
In sum, if it isn't already clear, Sears' stock has long since come within the exclusive province of speculators. Long-term, fundamentals-based investors need not apply.
You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW, and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!
Alamy Technology has changed a lot of things around your home over the past dozen years. You can buy a refrigerator that dispenses carbonated water. You can install a thermostat that learns your patterns and adjusts your climate accordingly. You can use your phone to turn off your porch light and check on your high-def webcam. However, of all of the rooms in the house, nothing has changed as dramatically as your living room. Digital delivery of media of the convergence of home theater appliances has radically transformed what the ideal living room looks like in 2014. Back in 2002, a showcase living room home theater wasn't complete without a DVD player, a VCR, a CD changer and more than likely a heavy tube TV. Some early adopters had the first DVRs. Blu-ray would be introduced a year later, and it would take a few years before the lighter LCD and plasma units (with larger screens) to be reasonably priced. These days no one is surprised when the only components of a home theater are a high-def TV, a Web-tethered streaming media player and perhaps a high-end audio system. The digital revolution is real, and it has transformed your living room. Investors aware of the shift may be able to profit from the convergence. Back to the Future Physical media is becoming obsolete. CDs were the first to go, peaking in popularity more than a decade ago. The record labels originally blamed piracy for the decline, but as Apple's (AAPL) iTunes Music Store gained in popularity, legal downloads replaced both the unreliable file-sharing MP3s and the compact disc. Books and DVDs followed. Both media forms may have peaked a couple of years ago with Amazon.com's (AMZN) Kindle and other e-readers gaining market share from traditional leafy reads, and streaming video has gained in popularity in homes backed by high-speed broadband connectivity. Netflix (NFLX) now has more than 50 million global subscribers. These companies were around in 2002. Apple was selling Macs, and it had just introduced the iPod a year earlier. Amazon was losing money selling books, CDs and DVDs online. Netflix was just getting off the ground renting DVDs by mail. They were market leaders in distributing physical media, and now they are leading the way in the digital revolution. Even video game consoles -- an iconic fixture in the 2002 living room -- are starting to show signs of vulnerability. As software goes digital -- with more of the grunt work taking place on servers -- we're seeing the Xbox One and PS4 emphasize their features beyond gaming. One More Nail in the Physical Media Coffin Another sign that the days of discs as media are numbered came earlier this month when Outerwall (OUTR) announced that it would be closing as many as 700 more Redbox kiosks than it will open this year. Redbox was the last company that was still growing its business of providing DVD rentals, but even it's feeling the pinch of viewers relying more and more on streaming. The good news for consumers is that the migration is easy on the pocketbook. DVD and Blu-ray players -- which at one point cost hundreds of dollars -- are now being replaced by compact streaming media players that can be had for as little as $35. Instead of bulky CD players or vinyl turntables, digital music can be stored on existing smartphones. All of this has made Netflix, Apple and Amazon some of the biggest winners over the past decade. The living room may be getting smaller, but the investing opportunities continue to get bigger. More from Rick Aristotle Munarriz
Subscribe via Email 
Subscribe RSS Comments Please leave your comment: 
MORE GURUFOCUS LINKS 
107.8 (1y: +40%) $(function(){var seriesOptions=[],yAxisOptions=[],name='CYT',display='';Highcharts.setOptions({global:{useUTC:true}});var d=new Date();$current_day=d.getDay();if($current_day==5||$current_day==0||$current_day==6){day=4;}else{day=7;} seriesOptions[0]={id:name,animation:false,color:'#4572A7',lineWidth:1,name:name.toUpperCase()+' stock price',threshold:null,data:[[1374555600000,77],[1374642000000,76.72],[1374728400000,76.82],[1374814800000,76.23],[1375074000000,76.77],[1375160400000,77.73],[1375246800000,77.9],[1375333200000,79.14],[1375419600000,79.35],[1375678800000,79.27],[1375765200000,79.45],[1375851600000,79.42],[1375938000000,80.19],[1376024400000,80.34],[1376283600000,80.35],[1376370000000,79.82],[1376456400000,78.9],[1376542800000,76.31],[1376629200000,75.41],[1376888400000,75.22],[1376974800000,76.7],[1377061200000,76.1],[1377147600000,77.22],[1377234000000,77.21],[1377493200000,77.69],[1377579600000,74.98],[1377666000000,74.88],[1377752400000,75.36],[1377838800000,74.78],[1378184400000,75.54],[1378270800000,76.33],[1378357200000,76.66],[1378443600000,76.65],[1378702800000,77.48],[1378789200000,78.08],[1378875600000,77.64],[1378962000000,77.95],[1379048400000,78.09],[1379307600000,79.36],[1379394000000,79.15],[1379480400000,79.61],[1379566800000,79.5],[1379653200000,77.98],[1379912400000,77.09],[1379998800000,78.04],[1380085200000,78.3],[1380171600000,79.77],[1380258000000,81],[1380517200000,81.36],[1380603600000,84.06],[1380690000000,83.5],[1380776400000,83.54],[1380862800000,85.56],[1381122000000,84.9],[1381208400000,83.3],[1381294800000,83.77],[1381381200000,84.97],[1381467600000,85.86],[1381726800000,85.62],[1381813200000,85.39],[1381899600000,85.92],[1381986000000,86.42],[1382072400000,84.19],[1382331600000,82.82],[1382418000000,81.88],[1382504400000,83],[1382590800000,83.93],[1382677200000,83.32],[1382936400000,82.67],[1383022800000,82.58],[1383109200000,82.82],[1383195600000,83.09],[1383282000000,83.8],[1383544800000,84.58],[1383631200000,83.15],[1383717600000,82.91],[1383804000000,82.5],[1383890400000,84.05],[1384149600000,85.2],[1384236000000,85.04],[1384322400000,85.86],[1384408800000,85.29],[1384495200000,86.04],[1384754400000,86.66],[1384840800000,86.12],[1384927200000,86.05],[1385013600000,87.07],[1385100000000,8! 7.76],[1385359200000,87.62],[1385445600000,88.23],[1385532000000,89.19],[1385704800000,89.48],[1385964000000,90.51],[1386050400000,90.31],[1386136800000,89.61],[1386223200000,88.76],[1386309600000,89.91],[1386568800000,90.48],[1386655200000,89.95],[1386741600000,89.11],[1386828000000,88.56],[1386914400000,89.06],[1387173600000,89.14],[1387260000000,89.21],[1387346400000,89.82],[1387432800000,89],[1387519200000,90.84],[1387778400000,91.58],[1387864800000,92.01],[1388037600000,92.06],[1388124000000,92.52],[1388383200000,93.1],[1388469600000,93.16],[1388642400000,91.84],[1388728800000,92.4],[1388988000000,91.94],[1389074400000,92.34],[1389160800000,92.63],[1389247200000,91.71],[1389333600000,92.1],[1389592800000,91.64],[1389679200000,92.8],[1389765600000,93.73],[1389852000000,93.42],[1389938400000,92.54],[1390284000000,92.62],[1390370400000,92.95],[1390456800000,92.15],[1390543200000,89.35],[1390802400000,89.1],[1390888800000,88.66],[1390975200000,88.27],[1391061600000,88.42],[1391148000000,89.97],[1391407200000,88.47],[1391493600000,89.44],[1391580000000,88.22],[1391666400000,89.14],[1391752800000,90.64],[1392012000000,91.1],[1392098400000,91.2],[1392184800000,91.03],[1392271200000,92.26],[1392357600000,92.07],[1392703200000,92.29],[1392789600000,90.86],[1392876000000,90.7],[1392962400000,90.55],[1393221600000,91.18],[1393308000000,91.71],[1393394400000,92.88],[1393480800000,95.15],[1393567200000,94.67],[1393826400000,94.36],[1393912800000,95.57],[1393999200000,95.97],[1394085600000,96.21],[1394172000000,96.06],[1394427600000,95.9],[1394514000000,94.76],[1394600400000,94.5],[1394686800000,93.11],[1394773200000,93.99],[1395032400000,94.91],[1395118800000,95.67],[1395205200000,95.31],[1395291600000,95.93],[1395378000000,96.95],[1395637200000,95.6],[1395723600000,96.05],[1395810000000,96.1],[1395896400000,95.5],[1395982800000,96.34],[1396242000000,97.61],[1396328400000,98.49],[13964148