Sears Tumbles for Fifth Day as REIT Excitement Dissipates

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Sears Holdings Corp. shares tumbled for a fifth straight day, hurt by concerns that selling a chunk of its stores will leave less value for investors.

A rights offering for its real estate investment trust, Seritage Growth Properties, began on Tuesday. The effort will let Sears sell stores and lease them back, capitalizing on its sprawling property holdings. Though investors have supported the REIT plan, which is expected to generate $2.6 billion in cash, it will leave the remaining company with fewer assets. The retailer has struggled to reignite sales at its Sears and Kmart chains, leading to 12 straight quarterly losses.

Because Sears’s operations aren’t generating cash, investors are more focused on the other resources it has on the books, said Matt McGinley, an analyst at Evercore ISI in New York. “The value of Sears is completely driven by the assets.”

On Monday, the Hoffman Estates, Illinois-based company reported a first-quarter loss of $303 million. Same-store sales, considered a key gauge of retail performance, dropped 11 percent, a result that McGinley called “horrific.”

Sears’s stock dropped 12 percent to $29.52 in New York on Wednesday, the worst one-day decline since January 2014. Before this week, the shares were up 24 percent in 2015, propelled by excitement about the REIT and the cash it would generate.

The proceeds from the real estate plan will buy the retailer 18 to 24 months of liquidity, said Noel Hebert, a Bloomberg Intelligence analyst. On the plus side, Sears still has some good properties left in its portfolio, he said.

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