Questions growing on future of Sears, Kmart
Stockholders looking for new earnings report
Sears and Kmart are running out of time to pull off an improbable comeback.
The parent company of the two chains, Sears Holdings, announced Thursday that it would close about 5 percent of its remaining stores, all of which it said were losing money.
The retailer plans to close 33 Sears and 13 Kmart locations in November, which will leave it with fewer than 800 full-line stores nationwide. As recently as 2012, the company had 1,305 Kmart stores and 867 full-line Sears stores in the U.S.
While the store closures mean it will be harder to find a Sears or Kmart this holiday season, both retailers are likely to survive to see the new year.
“I don’t think the company will have disappeared by then, as it is doing enough to keep its head above water,” said Neil Saunders, managing director of retail consultancy GlobalData.
But shoppers may find shelves that are far from full.
“Stock levels will likely be down, as vendors are cautious,” Saunders said.
The company’s finances look increasingly untenable, with a whopping debt payment due in January as losses continue to mount.
Sears’ stock fell 5.9 percent to $1.11 a share Thursday, and the entire company had a stock market value of less than $124 million.
S&P Global Market Intelligence estimated Sears lost about $251 million in its second fiscal quarter. Those losses are likely to continue barring an unexpected turnaround in fortunes for the retailer.
With about $466 million in total cash as of May 5, the company may be running out of options.
On the horizon: More than $400 million in debt payments are coming due in the company’s fourth fiscal quarter, which goes through January, according to Debtwire, a provider of news and analysis of corporate and municipal debt.
Sears declined to comment. But Chief Financial Officer Rob Riecker said in a statement in May that the company would pursue “repayments, refinancings and extensions of” nearterm debt “to support our transformation efforts.”
As investors await the company’s second-quarter earnings in the next week or so, the retailer’s fate likely rests in the hands of its CEO, chairman and largest shareholder, Eddie Lampert, who owns nearly 50 percent of the company.
Lampert has kept Sears alive over the past several years through a series of store closures, cost cuts and financial transactions, often involving the extension of loans from his hedge fund to the retailer.
Lampert offered on Aug. 14 to buy the retailer’s Kenmore household appliances brand and other assets in a deal worth up to $480 million. He described the deal as “critical” but did not say what would happen if it were rejected.