Sears Announces Doubts Over Future

Sears Holding Corp, at one time the largest retailer in the U.S., warned Tuesday over its ability to continue after years of suffering declining sales and losses.

Sears, in its annual report for its January 28 fiscal year end, said that its historical operating results indicate the existence of substantial doubt related to the ability of the company to continue as an ongoing concern.

The company added that an inability to generate more liquidity might limit access to new products or the ability it has to procure needed services.

Continual operating losses could also restrict its access to funds under its credit agreement, said the filing.

Sears’ warning arrived less than two months after it announced what it described as a next phase of strategic transformation, which it hoped in 2017 to lower costs by over $1 billion and cut pension and debt obligation by a minimum of $1.5 billion

Sears is also considering selling some businesses like DieHard battery and Kenmore appliances.

The catalog that made Sears so famous was a post-World War II emblem of consumer boom across the U.S. but the business could not adjust to the changing landscape of retail and increased competition from the likes of Target and Walmart as well as others.

Sears in its January 28 year-end report posted a $2.22 billion loss and since 2013 has accumulated losses of $7.4 billion and revenue drops of 44%. During that period, Sears cuts its store count in the U.S. by close to a third, lowered its holding in Canada and spun off clothing chain Lands’ End.

At this time, Sears has total liabilities of $13.2 billion.

Recently, Sears had put some stores into its real estate investment trust or REIT, sold Craftsman its line of tools and raised debt repeatedly from the hedge fund of CEO Edward Lampert.

Lampert owned close to 10% of the REIT that paid $2.6 billion to Sears in 2015 for its stores that it purchased, of which many were leased back to the longtime retailer.

This announcement by Sears of its possible demise is a big blow to Lampert, who took over the business after it merged with Kmart, which at the time he controlled, back in 2004.

Shortly afterwards he published a manifesto of 15 pages where he stated that conventional measures in retail success, like sales at same-stores, were not relevant any longer and said Sears would regain strength through closing stores were struggling as well as focus on the profitable ones.

Sears has not posted an annual profit since 2011.

Leave a Reply