February 10, 2017 / By Marianne Wilson
It’s not over yet for the embattled Sears Holdings, which is streamlining its operations on
the heels of what appears to be a brutal fourth quarter.
The long-struggling retailer on Friday announced a comprehensive restructuring that will
cut at least $1 billion in operating costs a year. The plan involves reducing corporate
overhead (although Sears did not specify, job cuts are likely), closer integration of the
Sears and Kmart operations and improving its merchandising, supply chain and inventory
Some of the $1 billion in savings will come from the previously announced 150 Sears and
Kmart store closings. And more closings are likely. In its restructuring statement, Sears said
it would "actively manage our real estate portfolio to identify additional opportunities.”
In addition, the retailer announced plans to reduce its outstanding debt and pension
obligations of $1.5 billion for fiscal 2017.
"We believe the actions outlined today will reduce our overall cash funding requirements and
ensure that Sears Holdings becomes a more agile and competitive retailer with a clear path
toward profitability," Sears chairman and CEO Eddie Lampert said in a statement.
Sears also said it has amended an existing deal with creditors that will allow it to borrow
$140 million more, giving the company more breathing room and help as its closes stores
and improves its online operations.
Sears announced the restructuring following what appears to be an awful fourth quarter.
In preliminary results, the chain said same-store sales fell 10.3%, with decrease of 8.0%
at Kmart and of 12.3% at Sears Domestic. Total revenue fell 16% to $6.1 billion, and net
losses widened by up to $635 million from $580 million in the year-ago period.
Despite grim warnings by many analysts and industry experts that Sears is headed toward
extinction, Lampert continues to remain relentlessly upbeat. He noted in Friday’s statement
that Sears “significantly improved” its operating performance and made progress toward
profitability in fourth quarter 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,” Lambert stated. “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.”
Under the restructuring program announced on Friday, Sears said it intends to:
• Simplify Sears Holdings' organizational structure, including greater consolidation of the
Sears and Kmart corporate and support functions, as well as improve accountability for
profitability at its store and online channels;
• Implement an integrated model to drive efficiencies in pricing, sourcing, supply chain
and inventory management;
• Optimize product assortment at Sears and Kmart stores, using data analytics to better
align with preferences of its “Best Members” and focusing on profitable, high-return
“Best Categories;” and
• Actively manage it real estate portfolio to identify additional opportunities for reconfiguration
and reduction of capital obligations.