Sears tries tax scheme to save itself
Shares of Sears Holdings (SHLD) are up 30% Friday after the struggling retailer announced a plan to sell upwards of 300 stores to a separate entity with tax advantages.
Sears would then lease the stores back from this entity, which is to be structured as a real-estate investment trust. REITs are increasingly popular corporate structures with companies that seek their unique corporate-level tax advantages.
The stores that are sold and leased back would still be operated by Sears. And Sears investors would be permitted to buy stock in the new REIT entity.
Sears continues to try to find sources of cash to solidify its balance sheet as the company's revenue falls and losses deepen. During the most recent quarter ended in August, Sears announced revenue fell nearly 10% to $8 billion from the same year ago quarter. During the period the company reported a net loss of $573 million.
And while the company's business fades, so too does its financial strength. Sears reported assets of $8.2 billion in August, of which nearly 80% is inventory. Meanwhile, the company's long-term debt jumped 47% to $2.8 billion.
Shares of the stock have been disappointing for investors. Shares are down nearly 30% over the past two years, while the rest of the market has jumped 47%.
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