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Hoffman Estates, Ill.— Sears Holdings Corp. (NASDAQ: SHLD) has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. A $134 million debt payment was due today.
Eddie Lampert will step down as Sears chief executive, but will remain the company’s chairman.
The Hoffman Estates-based company oversees both Sears and Kmart-branded department stores. The company has negotiated $300 million in senior financing from its lenders and is also in the process of negotiating a $300 million loan with ESL Investments Inc., which is Lampert’s hedge fund.
“While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer,” says Lampert. “The Chapter 11 process will give [Sears] the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right-sizing its operating model and return to profitability.”
Sears and Kmart stores will remain open for business, but the company plans to close 142 unprofitable stores by the end of the year. Liquidation sales at these stores are expected to begin shortly. This is in addition to the previously announced closure of 46 unprofitable stores that is expected complete by November.
Over the last five years, the company has lost about $5.8 billion, according to the New York Times. Over the past decade, it shut more than 1,000 stores. As of the filing, Sears has approximately 700 remaining stores and 68,000 employees, according to media reports.
“Occasionally a retailer can succeed by downsizing,” says Rick Scardino, principal and retail veteran with Lee & Associates of Illinois. “Possibly a successful 40,000-square-foot Sears store is trapped in an 80,000- to 100,000-square-foot store. Sears could then lease the space to a synergistic tenant, like what Aldi is doing with some of the downsized Kohl’s stores.”
Weil, Gotshal & Manges LLP is serving as legal counsel; M-III Partners is serving as restructuring advisor; and Lazard Frères & Co. LLC is serving as investment banker to Sears.
On Friday, Oct. 12, the company’s stock price closed at 41 cents per share, down sharply from $5.99 per share one year ago. The company’s five-year high was $48.60 on Nov. 11, 2013.
— Kristin Hiller