Sears (NASDAQ: SHLD) has not had an easy go of it recently.
The company has been closing stores while denying rumors that it plans to shut down entirely. In addition, the struggling retailer had to borrow $300 million from a hedge fund controlled by its CEO Eddie Lampert, adding to the $750 million in Sears debt he already owns.
The company has even had to deal with employees at its K-Mart unit questioning whether the company was secretly liquidating merchandise in preparation for shuttering the chain. Now, as it gets ready for the pivotal holiday season, a report from Fitch Ratings places the company on a list of retailers at risk not just of bankruptcy, but also liquidation.
What does the report say?
Fitch analysis put Sears Holdings, Claire's Stores and Nine West Holdings on a list of seven chains at high risk of defaulting within a year, Bloomberg reported.
"Brand degradation and competitive pressures to either price or experience can be real threats to the survival of struggling retailers," said Fitch Senior Director, Leveraged Finance Sharon Bonelli in a press release. "As a result, many retailers move into the bankruptcy process without a real reason to exist and ultimately end up in liquidation more often than bankrupt companies in other sectors."
The research firm blames the companies' financial struggles on the rise of e-commerce and discount retailers, declining mall traffic, and consumer spending shifts toward services and experiences.
Bonelli also blamed some of their woes on the fact that mall visits are "not as popular as something to do for a pastime, particularly among teens," she told Bloomberg. "They'd rather be on their phones and spending their disposable income on things like their electronics or restaurants, coffee shops."
What does this mean for Sears?
Sears likely only exists now because its CEO believes he can turn it around. Its ongoing survival depends upon his largess, as well as whether the company can raise cash by selling some of its assets. That could include real estate or some of its still-popular brands, such as Craftsman Tools.
Beyond those things, the company also has to find a sustainable business model that can generate enough cash to support operations. If it can't, Lampert may ultimately throw in the towel even while the chain still has assets to leverage.