Sears warns it faced ‘substantial doubt’ about ability to stay in business
22 Mar 2017
Sears Holdings, the company that operated Sears department store chain that dominated retail for decades, warned yesterday that it faced "substantial doubt" about its ability to continue in business unless it could borrow more and tap cash from more of its assets.
"Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern," Sears Holdings said in a filing with the Securities and Exchange Commission. In addition to Sears, Sears Holdings also operates Kmart stores.
Sears Holdings said it was working to find ways to mitigate that doubt, but it was not certain it would be able to raise the cash to keep going.
After Sears said in January that it planned to close 150 stores, in February the retailer launched a restructuring programme aimed at cutting $1 billion in costs annually and reducing debt by $1.5 billion, helped by proceeds from the sale of one of its most valuable brands, Craftsman tools to Stanley Black & Decker.
"We acknowledge that we continue to face a challenging competitive environment," Sears said in the filling. However, it was losing cash heavily, and after its 2016 loss, it had to finance its cash needs for operating expenses from "investing and financing activities."
According to the company, its comeback plan might help alleviate the concerns, ''satisfying our estimated liquidity needs 12 months from the issuance of the financial statements.''
The disclosure comes after more optimistic signs from the company, which had been working on a turnaround under chief executive officer Eddie Lampert. Sears posted a smaller loss than predicted in the fourth quarter, and had pledged to lower its debt burden and cut annual expenses by at least $1 billion.
Hedge fund manager Edward Lampert of ESL Investments, Sears's biggest investor, aimed to cut debt and pension obligations by $1.5 billion. The CEO had helped the ailing retailer stay afloat by offering over $1 billion of assistance, including a $500 million loan facility announced in January.
