‘Substantial doubt’ Sears, Kmart will continue operating stores: owner
THE corporate owner of Sears and Kmart said on Tuesday that there was “substantial doubt” that it could continue operating, as brick-and-mortar stores continue to face challenges in an e-commerce world.
In a filing with the Securities and Exchange Commission, the corporate owner, Sears Holdings Corp, cited its efforts to cut costs, sell property, tap new funding sources and make other moves to stanch the flow of red ink. Still, it reported a $2.2 billion loss for last year and said it had to use money from its investments and financing activities to fund operations.
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” it said in the filing, its annual report.
The disclosure is a setback for the company and for Edward S Lampert, the hedge fund manager who engineered the combination of the two legends of American retail 13 years ago. Lampert has shut down stores, reshuffled the company’s organisation and pushed to have a greater online presence. Still, Sears Holdings has lost more than $5 billion over the last three years as sales have declined.
On Wednesday morning, in the first day of trading after the disclosure, shares in the company tumbled more than 13 percent.
Sears, through its catalog, has been a fixture of US homes for more than a century. Kmart, which has its own lengthy history beginning as a five-and-dime store in Detroit, became a major national presence in the 1960s as a big-box department store, with Blue Light Special discounts geared toward penny-wise middle-class Americans.
But both brands were squeezed by WalMart Stores, with its heavy discounts, and Target, which sold affordable goods but with more design and flair. Both Sears and Kmart also suffered because they were in older shopping malls and neighbourhoods. Online retailing, with the rise of the likes of Amazon, presented a more recent challenge.
To cope, Sears Holdings has been shrinking. This month, it sold its Craftsman tool brand to Stanley Black & Decker in a deal valued at more than $775 million. Still, its long-term debt as of January totalled nearly $4.2 billion, almost double from the same period the previous year, according to the filing.
In February, Sears Holdings said it had started a restructuring program that it said would save $1 billion annually. The program is focused on streamlining its backoffice corporate and support functions, tweaking its product offerings and supply chain and looking for ways to reshuffle its real estate portfolio.
As of January, Sears Holdings said, it had 1,430 Sears and Kmart stores in the United States. By contrast, a decade ago it had about 3,800 stores in the United States and Canada.