Sears Juggles Finances To Free Up Funds

Sears Holdings has made several moves to restructure some of its finances and said that it expects to improve its net loss in its upcoming third quarter results. However, the company signaled that its comparable store sales for both Kmart and Sears are continuing to decline. 

The company said that it expects its third quarter 2017 net loss to improve by approximately $190 million and adjusted EBITDA to improve by approximately $100 million, using the mid-point estimate, versus the 2016 period. It would be the second consecutive quarter of at least $100 million year-over-year improvement in both metrics, the company said.

Still, preliminary third quarter company comparable store sales, excluding the impact of one-time events, are expected to decline 13.6%— with Kmart banner comps down 10.7% and Sears banner comps down 15.6%.

Sears Holdings also asserted that it had achieved its annualized cost savings target of $1.25 billion through the streamlining of operations and closure of underperforming stores. The company generated additional cash proceeds of approximately $167 million subsequent to quarter-end from real estate transactions and commercial arrangements, which Sears used to pay down outstanding real estate loans and revolver borrowings. As a result, Sears indicated, the company gained an adjusted availability on its revolving credit facility and general debt basket of $185 million and $120 million, respectively.

Sears Holdings maintained that it had paid down outstanding borrowings under its term loan maturing in June of 2018 by $205 million during November, reducing the outstanding balance to approximately $520 million, bringing the company’s total 2018 term loan repayment during 2017 to approximately $450 million.

In addition, the company has entered into an agreement with the Pension Benefit Guaranty Corp. to release approximately 140 Sears properties from a ring-fence arrangement in exchange for $407 million of contributions to its pension plans. Sears stated that the agreement provides it with financial flexibility through the ability to monetize properties as well as funding relief from contributions to the pension plans for the next two years.

Rob Riecker, Sears CFO, said, “Our recent actions further demonstrate our ability to manage our business while meeting our financial obligations. We continue to review our capital structure to maximize our additional financial flexibility. In addition, we will continue to evaluate alternatives to meaningfully reduce cash interest payments in 2018.”