Sears will consider all options, CEO says
Struggling retailer looking to renegotiate $1B in debt
Even as other department stores reported sales gains, Sears Holdings warned Wednesday that it will record a net loss for the period that included the critical holiday season, raising new doubts about the chain’s future.
Sears CEO Eddie Lampert sounded ominous in a blog post, writing that if the company can’t refinance certain debt to get more financial breathing room, it “will consider all other options to maximize the value of Sears Holdings’ assets.”
The retailer, which has both the Sears and Kmart chains, wants to renegotiate $1 billion in debt by extending due dates and overhauling other terms. That would allow the company to “unlock value in our other brands and major assets, including Kenmore, DieHard, Sears Home Services, Sears Auto Centers and our real estate portfolio,” Lampert said.
The company last year sold its Craftsman brand for $900 million and announced closures of about 400 stores, including Kmart locations. Sears had around 1,000 locations remaining when the new year began.
Sears, which announced last week it would close more than 100 additional stores, said Wednesday it would record a net loss of $200 million to $320 million for the fiscal fourth quarter.
The retailer is also pursuing new loans tied to its November plan to sell up to 140 properties after reaching a deal with the U.S. government to fund pensions. The company owes more than $1.4 billion in debt payments in 2018, according to market data analy- sis and research firm Debtwire.
Bankruptcy is “not unrealistic” if the company can’t renegotiate debt terms, said Philip Emma, senior retail and credit analyst at Debtwire. Sears warned last year there was “substantial doubt” about its long-term survival.
Sears reported its sales in November and December in stores open at least a year declined 16% to 17% compared to the same period a year ago. That contrasts with several other major chains. Target, Kohl’s, Macy’s, J.C. Penney and Nordstrom reported stronger-than-expected sales over the critical holiday period. Overall, the industry saw a 4.9% sales increase, the biggest since 2011, Mastercard SpendingPulse says.
There are signs of improved finances. The company’s fourth-quarter loss is better than the year-earlier period’s $607 million loss. But it also shows the retailer has not been able to stop the bleeding. In addition to ongoing store closures, which totaled about 400 locations in 2017, Sears said Wednesday it will shed $200 million in costs this year.
Lampert himself is the source of much of Sears’ financial backing. If he chooses to continue extending credit through his hedge fund, the company could yet live to fight another day.