Sears Holdings Chairman and CEO Edward Lampert said the company is making progress in its efforts to restructure its iconic retail business. This announcement comes a month after the company’s annual report expressed doubts the company could continue as a going concern.

Lampert provided updates on Sears’ strategic restructuring program, including incremental actions to increase its annualized cost savings target to $1.25 billion from $1 billion. The company also provided an update on its efforts to enhance its liquidity and financial flexibility.

“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,” said Lampert. “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.”

According to Lampert, Sears has achieved significant progress in its restructuring program, with $700 million in annualized cost savings already actioned to date. The initiatives being taken to realize $1.25 billion in annualized cost savings in 2017 include:

  • The previously announced closure of 150 non-profitable stores, comprised of 108 Kmart and 42 Sears locations, which has been completed
  • The closure of 92 underperforming pharmacy operations in certain Kmart stores and 50 Sears Auto Center locations
  • Simplification of the organizational structure of Sears Holdings through consolidation of the leadership of retail operations for Sears and Kmart and elimination of certain senior management roles
  • A comprehensive review of the company’s value chain to identify broader opportunities for competitively priced products and drive operational efficiencies

Since the beginning of the calendar year, Sears has executed numerous transactions to raise additional capital to fund its operations and continued transformation including:

  • Closing the previously announced secured loan facility and standby letter of credit facility, collectively totaling up to $1 billion
  • Amending its existing asset-based credit facility, which provided an additional $250 million of availability by increasing the short-term borrowing basket from $750 million to $1 billion
  • Completing the sale of the Craftsman brand to Stanley Black & Decker for a net present value of more than $900 million in cash
  • Monetizing certain real estate properties for $177.5 million

The Sears Holdings board of directors has also 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 as its advisors. The marketing process is actively proceeding. The special committee has received non-overlapping bids in excess of $700 million on more than 60 separate real estate properties and is expecting additional bids in the near future. Sales proceeds will be used to reduce debt and strengthen the company’s balance sheet.

Additionally, Sears Holdings is in discussions with its lenders to evaluate refinancing options for its secured loan facility maturing in July 2017.

The company tapped Rob Riecker, currently controller and head of Capital Market Activities, as CFO, effective immediately. Riecker joined the company in 2005 as assistant controller and served in various senior positions within the organization. Riecker succeeds Jason Hollar, who has resigned from Sears Holdings to pursue another career opportunity.

Follow the story:
Sears Annual Report: Company Doubts it Can Continue
Sears Outlines Next Phase of Its Strategic Transformation
Stanley to Purchase Craftsman Brand From Sears For $900MM