Seritage Growth Properties (NYSE:SRG) Is Making Moderate Use Of Debt

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Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Seritage Growth Properties (NYSE:SRG) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Seritage Growth Properties Carry?

As you can see below, Seritage Growth Properties had US$200.0m of debt at June 2025, down from US$280.0m a year prior. However, it also had US$71.8m in cash, and so its net debt is US$128.2m.

How Healthy Is Seritage Growth Properties' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Seritage Growth Properties had liabilities of US$23.0m due within 12 months and liabilities of US$200.0m due beyond that. Offsetting this, it had US$71.8m in cash and US$7.20m in receivables that were due within 12 months. So its liabilities total US$144.0m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of US$181.4m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Seritage Growth Properties will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for Seritage Growth Properties

Over 12 months, Seritage Growth Properties made a loss at the EBIT level, and saw its revenue drop to US$14m, which is a fall of 77%. That makes us nervous, to say the least.

Caveat Emptor

Not only did Seritage Growth Properties's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable US$56m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$51m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for Seritage Growth Properties that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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