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The End Is in Sight for Sears as Stock Takes a Further Tumble

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Sears bankruptcy

Struggling retail giant Sears (NASDAQ: SHLD) is limping toward bankruptcy as its stock took another major tumble on Tuesday. Sears stock fell by 9.7% percent with shares finishing the trading day down by around 6%.

Sears Stock

Sears stock yesterday

What brought about the sudden decline? An announcement that the retailer will be adding a “restructuring expert” to the team (read bankruptcy expert). Alan Carr, CEO of Drivetrain LLC, is the latest addition to the board.

No Good Ever Came Out of Restructuring Experts

Let’s face it, pretty much nothing good has ever come out of a company hiring a “restructuring expert.” It basically spells job losses, store closures, and liquidation of assets. And, in the case of Sears, just about any measures possible to make its pending $134 million debt repayment on October 15.

While Sears chairman and CEO Eddie Lempert insisted that the company was pleased to welcome him and praised Mr. Carr for his experience in organizational change, most shareholders remain unconvinced.

That’s probably because Mr. Carr has a reputation as a bankruptcy expert and fears are rising that Sears will be forced to file for bankruptcy protection. Carr is a former restructuring lawyer at Skadden, Arps, Slate, Meagher & Flom. And his firm Drivetrain is dedicated to restructuring.

Sears: The End of an Era

The company that changed how America shopped and lived is now an empty shell of its former self with stores falling into disrepair. Easily the Walmart and Amazon of its day, Sears was America’s largest employer. But somehow the mighty giant could never quite get to grips with the 21st century, making one calamitous move after another.

Instead of adapting to meet the online shopping threat head-on, it backstepped by buying up another struggling retailer Kmart. At the same time as losing ground in the internet battle, Sears began closing stores and failing to invest in its flagship ones.

Even fellow struggling retailers like Macy’s and JCPenney pulled out all the stops and used novel ways of getting customers in stores, such as geofencing marketing, massive displays, AR and VR, and in-store incentives to post strong holiday sales last year. Sears and Kmart’s holiday sales plummeted by 16% and 17% percent.

A Grim Outlook

With second-quarter revenue at $3.2 billion (down from $4.3 billion at the same point last year) the outlook for Sears is grim. A retail dinosaur that failed to compete in the Amazon age or come up with products relevant enough to keep hold of their fickle customers. According to Lampert, if the company doesn’t take drastic action soon, any value for shareholders could be reduced or eliminated completely.

Beyond the imminent $134 million, Sears is carrying a debt burden to the tune of $5.6 billion. But is selling off Sears’ assets really the best move for its shareholders who could end up losing out? Depends on who you talk to. It seems that CEO Mr. Lampert isn’t missing a trick. Sears has already sold off properties to Seritage Growth Properties, a real estate investment trust in which Mr. Lampert’s hedge fund has a hefty interest.

Featured image from Shutterstock.

Christina is a B2B writer, MBA, fintech and crypto reporter with a fascination for technology and a passion for starting interesting conversations. When not at her computer you can find her surfing a wave or sipping on wine. Sometimes, at the same time.

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Billion Dollar Companies

Procter & Gamble Surpasses Expected Revenue Thanks to Beauty Products

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P&G

Procter & Gamble (P&G) stocks have surged by 5% since Friday morning, as reported by CNBC. P&G announced that its beauty products are responsible for driving sales and helping the company in surpassing the expected revenue in the fiscal fourth quarter of 2018.

Wall Street was expecting earnings per share (EPS) to be $1.09 and revenue to be $16.46 billion. However, P&G’s report shows an increase in both these numbers–$1.12 for the former and $16.69 for the latter.

Compared with beauty products, P&G’s fabric and home-care brands sales jumped by 2%, while grooming, health care, baby, feminine, and family care dropped by 1%, 3%, and 3% respectively.

In this year, P&G’s shares slumped by 11%; the company now has a market cap of $202 billion.

Even though P&G faces competition from other rising startups, the company is positive that the current boom in revenue will “hold up.”

On October 16, Nasdaq published a post anticipating the results from the fiscal fourth quarter. The report stated that net sales would rise by 4% due to P&G’s beauty, fabric, and healthcare products. They predicted that Q4’s sales would come from baby, feminine and family care products. However, these categories are the ones that dropped the most in the latest quarter.

P&G Has Some Fierce Competition

P&G’s biggest competitor in the grooming industry is the Dollar Shave Club, which was acquired by Unilever in 2016. In an interview with Cincinnati Business CourierJon Moeller, the chief financial officer of P&G, said that grooming and baby products were:

“the two sales growth challenges.”

He added that the company was developing and funding ideas to support Gillette. Moeller also said that the stakes were higher since competitors are now expanding their products into Europe.

An online subscription program called Gillette on Demand was also launched by the company. It offers three different packages compared to the two packages offered by the Dollar Shave Club.

Gillette has been around since the 1980s but Dollar Shave Club has managed to attract more attention due to advanced marketing tactics. Currently, P&G expects its organic sales to fall between 2% to 3%, EPS between 6% to 8% and all-in-sales growth by approximately 3% in fiscal 2018.

Meanwhile, David Taylor, P&G’s CEO, recently launched 2019’s CEO Challenge where students solve various business problems. The finals will take place in May 2019 in Dubai.

Last year’s challenge was won by a group of industrial engineering students from Saudi Arabia. These students were also offered jobs in the company. This year, the real-world business problems students will solve are based on its grooming brand Gillette.

Featured image from Shutterstock.

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