Sears Holdings Corporation's (SHLD) looming demise could still provide pain for the broader retail sector.
The Hoffman Estates-based retail standby is feeling the pain this morning, as shares slide over 36% to just over $0.38 per share in early trading. The slide comes as shareholders anticipate a bankruptcy filing amid multiple hires of restructuring and bankruptcy experts.
The company has been able to patch over debt issues in the past, but as a debt payment that more than doubles the company's valuation
When the bankruptcy comes however, it will not be an immediate gain for competitors seeking to poach the open market share.
"In the short term, you will get liquidation that will add a little pain for the retail sector," Stacey Widlitz, President at SW Retail Advisors told Real Money. "This isn't great timing for retail as we head into the holidays."
She explained that competitors will feel a pinch on profits in the short term as Sears' liquidation prices undercut their products.
TheStreet founder and AAP portfolio manager Jim Cramer added that share recipients in the home improvement space like Lowe's Companies Inc. (LOW) and Home Depot Inc. (HD) will be sorry to see a consistent share donor exit the industry.
"This is bad news for Home Depot and Lowe's," Cramer explained on CNBC's Squawk on the Street. "Sears has been a share donor for years."
To be sure, Widlitz said that the retail sector will be much healthier sans Sears in the long run.
"Competitors will feel a pinch once bankruptcy comes, but in the long term this will leave a healthier sector," she said. "Sears' market share is crumbs, but however small their market share is, it has to go somewhere."
She explained that while competitors like Burlington (BURL) , TJX Companies (TJX) and Macy's (M) may see some moderate gains in the future, despite the short-term squeeze.
As we head into the holidays, investors will need to be wary of Sears.
