PetSmart, Inc. (PETM), Williams-Sonoma, Inc. (WSM), Sears Holdings Corp (SHLD): One Retailer To Buy, One to Hold and One to Sell

18% of the float shorted for this company
Well most would have already guessed, I’m referring to Sears Holdings Corp (NASDAQ:SHLD). The company has been one of the very few retailers who are going through tough times. Some years back, K-Mart bought Sears Holdings Corp (NASDAQ:SHLD) in an attempt to gain greater ubiquity and wider product choices. In hindsight, this merger appears as a patchwork mismatch of two separate companies that never produced the synergies to move them forward.

The company lacks any major initiatives that might help it progress. That said, the company has continuously been selling its assets in order to offset the cash that it has been bleeding since last year. The company recently (start of 2012) completed its spinoff of Orchard Supply Hardware Stores subsidiary. (It is interesting to note that Orchard Supply couldn’t manage to survive longer and filed for bankruptcy and is ready to be taken over by Lowe’s, a giant retailer of housing appliances.

This spinoff didn’t stop Sears Holdings Corp (NASDAQ:SHLD) from selling off its core. The company recently agreed to sell two of its best locations to mall owner CBL & Associates. According to CBL’s 10-K, one of the two stores sold by Sears Holdings Corp (NASDAQ:SHLD) was in CBL’s most productive mall. These two stores may have accounted for up to $100 million of Sears Holdings Corp (NASDAQ:SHLD) sales and over $4 million of EBITDA.

Overall, the company has got weak fundamentals and hence a weak outlook. It will require no less than a miracle to change this situation.

Final word

Williams-Sonoma, Inc. (NYSE:WSM) seems to have a bright future. However, given current expensive valuations, it seems much of the good news has already been priced in the stock. Fears of online competition are overdone among PetSmart, Inc. (NASDAQ:PETM)’s investors and given its diversification into pet services (from pet supply), it is well poised to see some appreciation. Hence, I will recommend it as a buy. Sears Holdings Corp (NASDAQ:SHLD) has a high percentage of shorted shares and there is a reason for that – the company is eating up its valuable assets to survive. Such a situation makes a solid case for sell recommendation.

The article 1 Retailer To Buy, 1 to Hold and 1 to Sell originally appeared on Fool.com and is written by Zain Abbas.

Zain Abbas has no position in any stocks mentioned. The Motley Fool recommends PetSmart and Williams-Sonoma.

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