Moody’s revises Sears to negative

Moody's Investors Service said it revised Sears Holdings Corp.'s rating outlook to negative from stable and affirmed all other ratings, including the Caa1 corporate family rating and the SGL-2 speculative grade liquidity rating.

Moody’s said the outlook revision reflects Sears’ continued declines in EBITDA with Domestic Adjusted EBITDA declining to $836 million (which includes rent paid to Seritage and related JVs) in fiscal 2015 and as a result cash burn during 2015 exceeded the agency’s previous expectations.

Disappointing fourth quarter results and full-year cash usage of an estimated $2.5 billion was partially related to softness in its apparel sales, which challenged the overall department store sector.

While the company is undertaking actions to reduce fixed costs, it has yet to demonstrate the ability to stabilize sales and gross margins such that cost savings translate into improved operating profitability, Moody’s said.

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