Standard & Poor’s placed Sears Holdings (NASDAQ:SHLD) on review for a possible downgrade late Wednesday, saying the retailer’s plan to close about 100 stores may do little to improve its overall performance.
“In our view, the company’s announcement of 100 to 120 store closures may do little to help its poor performance,” S&P said. “We believe that one of the primary issues is that the company has under-invested in its store base, especially when compared with its peers.”
The credit watch follows the company’s announcement that sales and margins continue to be pressured by poor performance in the consumer electronics, home appliances and apparel categories, S&P said.
It also reflects the Kmart and Sears store operators’ announcement this week that quarter-to-date performance is significantly below expectations on very poor holiday sales, with its fourth-quarter earnings slated to be less than half the prior year’s amount.
Because of those weak forecasts, Standards & Poor’s expects that credit protection metrics will “deteriorate further over the near term.”
Sears has been struggling to ease investor fears about the company’s turnaround efforts. It has reported a slide in sales open at least 12 months in every year since Sears Holdings was formed by billionaire investor Edward Lampert in 2005.
When Sears and Kmart combined under Sears Holdings, it was the nation’s third largest retailer with $55 billion in annual revenue. Last month, the retailer said quarterly sales tumbled to $9.6 billion.
Sears shares peaked at $191.93 in 2007; on Tuesday, they plunged 27% to $33.38 when the company announced more store closures, nearly halving their value this year alone.
They were down nearly 1% to $33.33 a share on Thursday morning.
S&P currently rates Sears' corporate credit at "B," which is five slots into "junk" bond territory.