Date
19 August 2017
Sears Holdings Corp., once the largest US retailer, has been struggling through years of losses and falling sales. Photo: Reuters
Sears Holdings Corp., once the largest US retailer, has been struggling through years of losses and falling sales. Photo: Reuters

US retailer Sears issues warning on ability to survive

Sears Holdings Corp., once the largest US retailer, warned about its ability to continue operating after years of losses and declining sales.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Reuters quoted Sears as saying in its annual report for the fiscal year ended Jan. 28.

The company said an inability to generate additional liquidity might limit its access to new merchandise or its ability to procure services.

Continued operating losses also could restrict access to new funds under its domestic credit agreement, according to the filing.

The warning comes less than six weeks after the company announced what it called the “next phase of its strategic transformation”, in which it hoped this year to reduce costs by US$1 billion and cut its debt and pension obligations by at least US$1.5 billion.

The company is also considering selling some of its businesses, such as the Kenmore appliances and DieHard car battery brands.

The Sears catalog was an emblem of the post-World War II consumer boom in the United States but the company was unable to adjust to the changing retail landscape and rising competition from Wal-Mart Stores, Target Corp. and others.

The company lost US$2.22 billion in the year ended Jan. 28. Since 2013 it has accumulated US$7.4 billion in losses and seen revenue fall 44 percent to US$22.1 billion.

During that time, Sears cut the number of its US stores by nearly a third, reduced holdings in Sears Canada, and spun off the Lands’ End clothing chain.

Its total liabilities stand at US$13.19 billion.

In recent years, Sears has placed some of its stores into a real estate investment trust (REIT), sold its Craftsman line of tools, and repeatedly raised debt from billionaire chief executive Edward Lampert’s hedge fund.

Lampert owned nearly 10 percent of the REIT that paid Sears YS$2.6 billion in 2015 for stores that it purchased, many of which were then leased back to the retailer.

The announcement of Sears’ potential demise is a blow to Lampert, a hedge fund investor who took control of Sears after merging it with Kmart, which he controlled, in 2004.

Sears last turned an annual profit in 2011.

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CG

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