Report: Sears Holdings Bankruptcy A Possibility

As Sears Holdings continues working to overcome slumping sales at its Sears and Kmart stores, the company is facing the possibility of a bankruptcy filing within one to two years, TheStreet.com has reported, citing information from Fitch Ratings.

Sharon Bonelli, an author of the Fitch report, told TheStreet.com that the troubled retailer has “significant default risk” over the next 12 to 24 months stemming from a variety of issues that include continued weak store traffic and high debt levels. As a result, the company would have to liquidate to pay its creditors or reorganize through a Chapter 11 bankruptcy filing, she said.

While there remains uncertainty over the company’s future, its fiscal challenges have continued this year. For the second quarter ended July 30, Sears Holdings reported a net loss of $395 million compared to a net loss of $208 million in the comparable quarter the previous year. Kmart comparable store sales slipped 3.3%, while Sears same-store sales were down 7% year over year.

In addition, the company recently said that it would close 64 Kmart locations on top of the 68 Kmart store closures announced this past spring.