Sears Holdings Corp. announced the departure of Bruce Berkowitz on Monday. Mr. Berkowitz is the head of the second largest shareholder of the department store giant. He is resigning after only two years of having taken a seat on Sears’ board of directors to help the struggling company turn around.
Sears’ stocks plunged by a huge 12% immediately after this announcement was made. The company’s share price dropped to $5.99, its lowest since February this year. Trading volume was up at 5.5 million shares versus the daily average of 1.1 million shares. The store’s shares have dropped 35.5% year-to-date.
This is not the only bad news that the department store giant has had to deal with in the last few days.
While Berkowitz is leaving Sears, both were quick to state that it wasn’t due to any animosity or disagreement. The rub is that the funding firm he runs, Fairholme Capital Management, is winding down. The firm owned 28.9 million Sears shares, which were 26.9% of the outstanding shares, making Fairholme the second largest shareholder after the CEO and Chairman Edward Lampert’s 30% stake.
Berkowitz joined the Sears board of directors in February of 2016 after he insisted that he wanted to play a more active part in the company’s management. Which means he was executive director for a mere 20 months.
While the firm is winding down and redistributing its shares, Berkowitz has retained his personal shares. However, the re-distribution has been a red flag for other investors as was proved in this week’s trading and share sell offs.
The company has been struggling for some time now, losing ground to online retail giant Amazon.com and discount giant Walmart. Earlier, in February this year, Sears had announced a re-structuring plan that would save the company about $1 billion in costs as well as reduce its debt and also fulfil its pension obligations. Post this announcement, the company’s shares skyrocketed almost 153% to trade at $13.99 (as compared to the lowest $5.54 the company’s stocks reached on February 9).
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However, this high did not last long and the company’s stocks began to slide again. The failing retailer has been kept afloat by Lampert, the company’s CEO and Chairman. He has been using his personal funds to keep the company going. Sears has lost more than $11 billion in the last 6 years. The company has be selling or spinning off its assets to keep going in the last few years.
The bad news just gets worse as Sears Canada filed bankruptcy last year and its CEO Brandon Stanzi attempted the sell-off of parts of the company’s assets so that Sears could still survive as a smaller company. This plan was a failure and so now the Sears Canada is to be liquidated completely. Investors were critical of Lampert for not trying to bail Sears Canada out of its troubles. However, others said there wasn’t much he could have done to save the Canadian arm of his company.
Despite all the bad news plummeting Sears, the company’s shares are still not trading at bankruptcy levels. Analysts are speculating that this could be because of the upcoming shopping season when Lampert is hoping that consumers will be willing to spend enough to tide them over to better times. The challenge is that consumers may be willing to spend, but just not at his stores. The beleaguered company’s woes mount as many suppliers have refused to work with Sears any more. This means that the company will not stock the merchandise that could attract customers and save the company.