Sizzle/Fizzle

Smart Sizzles, Dodd-Frank Fizzles And Sears Might Be Signing Off?

Live by the fickle consumer, and, if you’re a (very) aging retailer, possibly die by the fickle consumer. In commerce, history only goes so far, while memory does not stretch far enough, perhaps. And meanwhile, politics ain’t a beanbag, but it’s bouncing the stock market around hither and yon.

Sizzle    

The Main Street storefront: Growing so rapidly, one must wonder if there are enough hammers, nails and plaster to keep up. The PYMNTS Store Front Index™ showed that storefront businesses nationwide grew 2.1 percent in the last quarter of last year, once again outpacing GDP. The fitness industry was up 6 percent, driven in part by 7 percent employment growth. Clearly the smaller business climate is muscling up.

FinTech, and tech, for the #RestofUs: J.D. Vance, famed author of Hillbilly Elegy, is now turning with renewed energy to venture capitalism and is headed to the Midwest for VC deals, courtesy of Steve Case’s Revolution LLC. The goal is to look beyond the big cities for investment and innovation, with a mindset to level the VC playing field — and find untapped wellsprings of potential. Vance had touched on this at IP 2017.

M&A in alt lending: In an industry that is not doing all that well in terms of investor sentiment and getting the gimlet eye of regulators, what’s alternative lending to do? Merge. Kabbage may be bidding for OnDeck, which may help solidify the stronger players in an industry that is still evolving — and looking for a business model that can keep them afloat.

Fizzle

Trump stock rally stall? The investment world is getting skittish amid Capitol Hill battles, and stocks were rocky this past week. The biggest drop since before the election came as the health care repeal-and-replace seemed less than certain, with a delay likely if the vote stalled. The banks, bankers and traders want Dodd-Frank scaled back. They may have to wait. Live by Trump, get trumped?

Bitcoin slump: What’s a virtual currency to do? Three days of skids sent the bitcoin price down to its lowest level in months. No ETF investment vehicles and more scrutiny in China and maybe even some nervousness over commodities in general make this a favorite poster child for irrational exuberance.

Cybersecurity: the old way of viewing hacks may have to get scrapped. No longer just teens in hoodies, now we have state actors with firepower to steal money from other countries. A firewall is nice. But not when the wall is on fire. If — and it’s still an if — North Korea directed the $81 million heist from Bangladesh, we are going to need a lot more cyber know-how, and fast.

Fizzle of the Week: Sears, Time to Say Good-Bye

While it would be hard to claim the news came as a complete shock, given the last several years of ever-diminishing results, it seems that Sears may be ready to finally give up the ghost.

It’s an ending that comes with more of a whimper than a bang that had looked long inevitable for the 131-year-old retailer. And it’s been a long, hard fall. While Sears at this point may feel like it’s been perennially on the edge of extinction, it’s hard to believe that in the year that 26-year-old millennials were born, 1991, the most active debate in retail was over who the biggest retailer was: Sears or Walmart?

Four years later, that debate had declared a clear winner: By 1995, Walmart was crowned as the biggest retailer on Earth.

Sears slipped to number two — and it’s been mostly the unfortunate effects of gravity ever since. The last decade has been particularly decimating. During the Great Recession of 2008, consumers started eschewing the malls that Sears anchored, and the company never quite managed to find their way back during the recovery period.

On Wednesday, it seems the boom that began its final descent was lowered when the company released its annual SEC filing and signaled that it might just be time to start working on its obituary.

“Substantial doubt exists related to the company’s ability to continue as a going concern.”

That’s generally not the kind of thing that a company says “just because.” It’s the kind of thing that you say when you have a fiduciary duty as a publicly traded company to signal when better times may not lie ahead.

Well, if there was anything at Sears you wanted to buy …

Or course, that has been the main trouble the super-centenarian retailer has faced over the years: There seems to be less and less at Sears these days that consumers want to buy. In the last ten years or so, Sears has seen its sales fall by 50 percent. Hundreds of stores have closed, pension obligations have been slashed, plum retail assets have been sold off — and the firm has taken on debt.

A lot of it.

Most of which comes care of Sears CEO and President Eddie Lampert. Lampert is also Sears top shareholder and, through his hedge fund, the proud owner of about $900 million in Sears debt.

Many, like analyst Matthew McGinley, have interpreted Lampert’s efforts to keep Sears afloat as “clearly trying to avoid the inevitable,” though others have speculated that Lampert has actually designed Sears descent to maximize his value as its largest shareholder.

Sear’s official comment on its rather disturbing regulatory filing, incidentally, has also been interpreted as a bit of an ominous sign.

In a blog post on its website, Sears clarified the grim sounding sentence in its annual filing as “in line with regulatory standards that require management to assess and disclose potential risks the company could face within one year from the reported financial statements.”

Like we said.

Though there was some backend confidence, the blog post also noted that, “despite the risks outlined, we remain confident in our financial position and remain focused on executing our transformation plan.”

The transformation — rolled out in early 2017 — is a push to drive $1 billion in savings for the company through closing unprofitable stores, cutting jobs and selling more of its associated name brands, including its Kenmore appliances.

Craftsman was sold in January 2017 to Stanley Black & Decker for $900 million.

Perhaps way too little, way too late.

Courtesy of the SEC filing, our fizzle of the week.

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