Shares of Sears, Roebuck and Co. fell sharply on Wednesday as an analyst downgrade rekindled concern the nation's fourth largest retailer may face a prolonged slump in earnings and sales growth. One analyst said worries about the health of the company's credit card business also continued to weigh on Sears' share price performance.
Sears shares lost nearly 11 percent by mid-morning on the New York Stock Exchange extending a slide begun last Thursday when it reported sales at stores open at least a year fell by 10 percent, a 14th straight monthly decline. The stock recovered somewhat in late morning, trading down U.S. $1.75, or 7.7 percent, at $20.95. Earlier, the shares had tumbled to fresh 10-year lows, wiping out more than $700 million in the company's market value.
Goldman Sachs analyst George Strachan cut his investment rating on Sears to "underperform" from "in-line" earlier on Wednesday. He gave no further details in a brief research note to clients.
Roz Bryant, a retail industry analyst at Morningstar, cited the downgrade for the stock drop, saying "there is concern about what kind of customer Sears wants to target for its apparel business." She added that another concern revolved around "the declining demand facing Sears hard goods business" as its appliance sales continue to be weaker. Ms. Bryant added that investors may also be viewing the company's business strategy as less effective in helping restore earnings and sales growth.
On the credit card business, Bryant said, "there is concern about management's ability to continue to run that business." Last Friday one credit ratings agency cut Sears notes covering $808 million of securities backed by credit card receivables after other ratings agencies put their Sears credit ratings under review for a possible cut on worries about bad customer credit card debts. (Reuters)
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