With Sales Sliding, Sears Asserts Survival Plan

Sears Holdings Corp. has undertaken a restructuring program targeted to deliver at least $1 billion in annualized cost savings in 2017, which includes cost reductions from the previously announced closure of 108 Kmart and 42 Sears stores.

As part of the restructuring program, Sears Holdings is revising its organizational structure, including greater consolidation of the Sears and Kmart corporate and support functions, as well as improve accountability for profitability at store and online channels. The company also stated that it is implementing integrated modeling to drive efficiencies in pricing, sourcing, supply chain and inventory management. It plans to optimize product assortment at Sears and Kmart stores using data analytics to better align with preferences of best members in its Shop Your Way loyalty program and focus on profitable, high-return best categories. On the real estate side, the company would actively manage its portfolio to identify additional opportunities for reconfiguration and reduction of capital obligations.

In addition, Sears Holdings asserted that it would continue to assess the company’s overall operating model and capital structure to become a more agile, asset-light and innovative retailer focused on member experience. To help drive profitability, Sears Holdings maintained that it would capitalize on real estate through potential in-store partnerships, sub-divisions and reformatting to support the company’s integrated retail model even as it continues to evaluate strategic options for the Kenmore and DieHard brands, the Sears Home Services and Sears Auto Centers business through partnerships, joint ventures and other means.

After suffering slower sales, Sears indicated that it expects total revenues of $6.1 billion in the fourth quarter and $22.1 billion for the full-year in 2016. Total fourth quarter comparable store sales declined 10.3%, comprised of an 8% decrease at Kmart and decrease of 12.3% at Sears. The company anticipates a fourth quarter 2016 company net loss between $635 million and $535 million inclusive of a non-cash impairment charge related to the Sears trade name of between $350 million and $400 million. In the year-prior fourth quarter, company net loss was $580 million inclusive of a non-cash impairment charge related to the Sears trade name of $180 million.

Edward Lampert, Sears Holdings chairman and CEO, said, “We significantly improved our operating performance and made progress toward profitability in the fourth quarter of 2016. In the first several weeks of 2017, we undertook a series of transactions to optimize our capital structure and unlock value across our wide range of assets. We also reached an agreement to amend our asset-based credit facility which further enhances our liquidity and financial flexibility. Furthermore, we intend to use net proceeds from our announced Craftsman and real estate transactions, as well as from improvements in the operating performance of the company, to meaningfully reduce our outstanding obligations and their associated expenses.”