Is the Death of Sears Inevitable?

One of the cornerstones of American retail continues to struggle in these changing times; certainly a sign of things to come. Sears has just announced a major restructuring plan (last month) which aims to cut at last 41 billion through the selling of more stores, cutting jobs, and selling off brand assets. You may recall that the company has been selling assets left and right over the past couple years—things like its Craftsman tool brand—to trim the fat.

New pension agreements could prevent future spinoffs and that could lead to funding shortfalls—so the company is also looking to restructure its debt so it can have more breathing room during the transition.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” the company said, in its filing with the Securities and Exchange Commission.

You may recall, in January, the company announced its plan to close 150 stores. The next month, Sears revealed the plan to cut at least $1 billion in annual costs as well as $1.5 billion in debt reduction as a result of its sale of its most valued brands. This includes Craftsman tools, of course, as well as Black & Decker. And that also means that a significant number of the retailer’s 140,000 jobs are at stake, too.

In the filing, Sears goes on to say, “We acknowledge that we continue to face a challenging competitive environment,” adding that it had lost $607 million (or $5.67 per diluted share) during the quarter ending Jan 28. This becomes yet more significant when you note that the company reported a loss of $580 million—$5.44 per diluted share—from the same period a year earlier. In all, the company has posted a loss in 22 out of 24 quarters, says Standard & Poors Global Market Intelligence.

Furthermore, Sears has reported its revenue fell to $6.1 billion in the fourth quarter, also down from the same period the year prior ($7.3 billion). This dip, though, was largely a result of fewer full-line Sears and Kmart stores; a combined revenue loss of $596 million. However, sales at stores that had been open at least one year drastically plunged more than 10 percent (roughly $555 million in lost revenue).

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