Sears Holdings gives update on restructuring, real estate and finances
Things aren’t getting any better at Sears Holdings, at least not sales wise — and more store closings are in the works.
The struggling chain on Friday provided an update on its restructuring program, which now includes plans to close 50 Auto Centers, increased its cost-saving target, and also gave a first quarter update. Since the beginning of the fiscal year, same-store sales at Sears and Kmart declined 11.9% on a combined basis, 10.8% when excluding consumer electronics, compared to the year-ago period.
“The retail environment remained challenging with continued softness in store traffic and elevated price competition,” said Edward S. Lampert, chairman and CEO of Sears Holdings. “Despite the softness in our retail channels, our home services business continued to perform well and we believe it is positioned for continued growth for the balance of the year.”
Lampert added that as a result of the sales of its Craftsman brand and the sale of certain real estate properties, the company expects to report positive net income for the first quarter of 2017.
Sears said it expects to reduce costs by $1.25 billion for the year, up from a previously announced $1 billion. The retailer said it has already delivered on $700 million in cost savings to date. The initiatives being taken to realize $1.25 billion in annualized cost savings in 2017 include the previously announced closing of 108 Kmart and 42 Sears stores. New actions include the closing of 92 underperforming pharmacy operations in certain Kmart stores and 50 Sears Auto Center locations.
“Earlier this year, we initiated a strategic restructuring program and committed to improving our operating performance and financial flexibility in a very challenging retail environment," Lampert said. "While we have made significant progress in reducing our cost base and enhancing our member value proposition, we need to take further action. Accordingly, we will increase our structural cost savings target by $250 million on an annualized basis and accelerate our efforts to maximize value from our real estate portfolio, which we believe will improve our financial flexibility as we pursue our strategic transformation."
Lampert added that Sears will to take all necessary actions to improve its performance and will leverage its lease optionality to reconfigure its stores and reduce capital obligations.
Sears has established a special committee of independent directors to market certain real estate properties. The committee has retained Eastdil Secured, Centerview Partners, and Weil, Gotshal & Manges LLP as its advisors. As of Friday, April 21, the committee has received non-overlapping bids in excess of $700 million on over 60 separate real estate properties.