Sears has ‘substantial doubt’ about its future
Spokesperson said company’s Canadian operations are separate from U.S., despite large investments
NEW YORK— Sears, once the monolith of North American retail, says that there is “substantial doubt” that it will be able to keep its doors open.
Sears Holding Corp. shares, which hit an all-time low last month, tumbled more than 5 per cent before the opening bell Wednesday.
Millions of dollars have been funnelled through the hedge fund of chairperson and CEO Edward Lampert to keep Sears afloat, but with sales fading, it is burning through cash. Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy.
Vince Power, a spokesperson for Sears Canada, said Wednesday morning that operations in Canada are separate from the U.S., despite the fact that Sears Holdings owns 11.7 per cent of shares and Lampert’s investment affiliates own 45.3 per cent.
Sears Canada is expected to release fourth quarter and annual results in April. Net loss for the third quarter was $120 million. The company ended the quarter with $155 million in cash, along with proceeds of $152.2 million from various real estate transactions.
Sears Canada is in the midst of launching a new off-price initiative, featuring discount-priced designer brands in apparel and homewares, within existing stores and online, called the Cut at Sears.
The company employs more than16,000 Canadians, operating 135 corporate stores and 69 Hometown stores nationwide.
Sears Holdings Corp. lost more than $2 billion (U.S.) last year, according to a regulatory filing made late Tuesday. Adjusted for one-time charges, its loss was $887 million.
Sears has been selling assets, most recently its Craftsman tool brand. But it says its pension agreements may prevent the spinoff of more businesses, potentially leading to a shortfall in funding.
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears said in a filing with the Securities and Exchange Commission.
Sears, which employs 140,000 people, announced a major restructuring plan in February with hopes of cutting costs by $1billion through the sale of more stores, jobs cuts and brand asset sales. And it’s reconfiguring its debts to give itself more breathing room. But it has to get more people through the doors or shopping for Sears brands online.
Sales at Sears and Kmart locations that have been open at least a year, a key indicator of a retailer’s health, dropped 10.3 per cent in the final quarter of 2016.
The company plans to use a big portion of the $900 million it got for Craftsman to shore up its pension plan. It will put $250 million in cash and some income from annual payments toward the plan as part of a deal with the Pension Benefit Guarantee Corp., a federal agency that protects private pension plans.
The company said in its regulatory filing, however, that its agreement with the agency might stand in the way of more asset sales that would buy it more time.
Lampert has long pledged to return Sears to greatness, leveraging bestknown brands such as Kenmore and DieHard, as well as its vast holdings of land. Those aspirations have been scrambled by a new consumer that has ripped up the decades-old playbook that the industry has relied upon for years.
In its most recent quarter, Sears, based in Hoffman Estates, Ill., just northwest of Chicago, lost $607 million. Revenue declined to $6.05 billion from $7.3 billion during the same period the year before.
It was the sixth consecutive quarter of losses. The company has not turned annual profit since 2011. With files from Francine Kopun