Sears Holdings to Close More Stores as It Tries to Stem Losses

Moves to gain more cash with loan and sale of Craftsman
January 5, 2017David Gill

SearsHoldings3x2HOFFMAN ESTATES, Ill.-Sears Holdings plans to shutter an additional 150 Kmart and Sears stores and has made other moves to improve its financial condition.

The closings will involve 108 Kmarts and 42 Sears stores that are unprofitable, according to a statement from Sears Holdings. In addition, the company has obtained a $500 million loan secured by real estate properties, which—along with a letter-of-credit facility it received from affiliates of ESL Investments, its largest shareholder and run by Edward Lampert, its chairman and CEO—will generate $1 billion in liquidity. The letter-of-credit facility was originally for $200 million but was expanded by another $300 million at Sears Holdings’ request.

In 2016, the company closed 160 stores—120 Kmarts and 40 Sears stores—in the first three fiscal quarters.

Sears Holdings has also agreed to sell its Craftsman brand to Stanley Black & Decker for a cumulative $775 million, consisting of $525 million in cash at the closing and $250 million at the end of year three after the closing. Also, the Sears board has formed a committee to market certain of its real estate properties, with the goal of raising more than $1 billion.

“We are taking strong, decisive actions today to stabilize the company and improve our financial flexibility in what remains a challenging retail environment,” Lampert said. “We are committed to improving short-term operating performance in order to achieve our long-term transformation.” The latter refers to Sears Holdings’ long-term effort to change itself from a store-based, “asset-intensive” business to a model focused on its Shop Your Way membership program.

Thus far in the fourth quarter, which began Oct. 30, same-store sales at Sears and Kmart stores combined have fallen in the range of 12-13 percent, according to the statement. For the third quarter, Sears Holdings reported a net loss of $748 million, compared to a net loss of $454 million in the third quarter of last year, as net sales fell 12.5 percent—which included declines of 10 percent in same-store sales at Sears stores and 4.4 percent at Kmart stores.

David GillDavid Gill | Contributing Editor

David Gill is a contributing editor to HFN.


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