Published: Thu, October 11, 2018
Economy | By

Sears preparing for bankruptcy in U.S.

Sears preparing for bankruptcy in U.S.

"The problem in Sears case is that it is a poor retailer", said Neil Saunders, Managing Director of GlobalData Retail, in a Tuesday research note, where he wrote that he wasn't surprised the retailer was preparing for a possible bankruptcy filing.

Where we were: Sears's struggles are nothing new, and have been an overhang for some real estate owners.

Sears Holdings Corp is preparing to file for Chapter 11 bankruptcy protection in the coming days, sources said on Wednesday, casting doubt over the future of what was once the world's largest retailer and sending its shares to a record low.

Even a retail rally hasn't been able to save Sears. The stock is down some 90% in 2018, and just keeps falling.

Sears has hired M-III Partners, a boutique advisory firm specializing in seeing companies through bankruptcies and restructuring, according to the Wall Street Journal.

A sign hangs above a 60-year-old Sears store slated for closing on July 7, 2017, in Chicago. Instead, it was forced to liquidate last March, after creditors balked at providing a new lifeline to the company.

But many flailing retailers have tried that tactic before and failed (see: Toys "R" Us).

Retaining the confidence of vendors is also key to Sears remaining operational.

Sears shares are down 35 percent this morning and trading at 38 cents a share. The stock, which traded above US$100 a decade ago, has fallen to less than $1 in the past year.

It warned in September for a second time that it could go out of business, hurt by falling foot traffic at its brick-and-mortar stores as customers shift online. The company is now $5.6 billion in debt.

The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses, while its sales have not grown since the 2008 financial crisis.

Sears and Kmart have lost more than $11 billion since 2011, and their annual sales have dropped almost 60 percent in that period to $16.7 billion, according to the report.

Lampert also expects that Sears could get more value for its assets by selling them while it is a going concern, the newspaper added. CEO and primary shareholder Eddie Lampert told the company's board that it was crucial it restructure more than $5 billion it owes "without delay", according to a recent regulatory filing.

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