Sears Holdings Corp (NYSE:SHLD) announced disastrous holiday sales which has led many to believe that 2018 is the year that the long suffering Sears Holdings goes out of business–and if not this year, then 2019. Sears Holdings’ debt is bloated as it continues to bleed money every quarter and overall sales are down. In fact, Sears Holdings’ holiday sales decline was miserable, and the company’s share price has cratered more than 65% since the start of 2017 to around $3.50. Despite cost-cutting initiatives, a large number of stores were shuttered in 2017, and more Sears Holdings store closures in 2018 look likely.
The retailer, which operates Sears and Kmart, announced that comparable sales over the holiday season tumbled between 16% to 17% in November and December. Sears Holdings’ sales decline was blamed on pharmacy closures at some Kmart stores and fewer electronics on store shelves, but even when you take pharmacies and electronics out of the equation, sales were still down an eye-watering 14% to 15%.
These results are in sharp contrast to what other struggling retailers reported over the same period. More broadly, overall retail sales in the U.S. advanced 4.9% between November 1 and December 24. Brands like Macy’s Inc (NYSE:M) and J C Penney Company Inc (NYSE:JCP) are also facing economic headwinds and posting modest sales growth. Meanwhile, Target Corporation (NYSE:TGT) and Kohl’s Corporation (NYSE:KSS) reported strong holiday sales. This does not bode well for Sears.
To that end, last week, Sears Holdings’ cost-cutting initiatives included the announcement that it was closing another 103 stores in 2018. This comes just two months after Sears said it was closing over 60 stores in January 2018. The struggling retailer shut down more than 350 Sears and Kmart stores in 2017.
It clearly hasn’t been enough to right the ship. On January 10, the company announced even broader, more fundamental changes in its business model and capital structure in an effort to stave off Sears Holdings going out of business. Most significantly, it announced a staggering $200.0 million in cost cuts in 2018 unrelated to store closures.
Sears is also looking to increase the amount of money it can borrow. If throwing more money at the problem was the solution, Sears would have turned the corner years ago. But it isn’t.
While CEO Eddie Lampert sounded upbeat about the future of Sears Holdings’ “out of business” chances, he warned that the company’s board will, “consider all other options to maximize the value of Sears’ Holdings’ assets,” should the company be unable to refinance its debt.
Suffice it to say, 2018 will remain a difficult time for Sears Holdings. It will also be a year of uncertainty for its employees.
Sears Holdings Debt Load Spiked to $4.0 Billion
Sears Holdings continues to churn out terrible quarterly results. In the third quarter of 2017, ended October 31, revenue plunged 26% to $3.7 billion. Total same-store sales tumbled 15.3% during in the third quarter: sales were down 13% at Kmart locations, and 17% in comparable sales at Sears stores.
The company’s net loss improved slightly to $558.0 million, or $5.19 per share, versus a third-quarter loss of $748 million, or $6.99 per share, in 2016.
While Sears was able to narrow its losses, sales have fallen for six consecutive years. On top of that, Sears Holdings’ debt continues to balloon, surpassing $4.0 billion; increasing Sears Holdings’ bankruptcy risk in 2018.
Sears Holdings Store Closings in 2018
After a tumultuous 2017, where Sears Holdings shuttered more than 350 stores, the troubles are bleeding into 2018. Sears Holdings store closings in 2018 were announced in November, when the company said it would be closing more than 60 stores in January 2018. That number includes 18 Sears store closings in 2018, as well as 45 Kmart store closings in 2018–and that’s just the first month of the year.
In the first week of January, Sears Holdings announced it was closing even more stores. The one-time retail giant said it would close 103 stores: 64 Kmart locations will close along with 39 Sears stores. The stores are slated to close between early March and early April 2018. Liquidation sales are expected to begin as early as January 12, 2018.
There is little doubt that the Sears Holdings closing list for 2018 will continue to grow. The massive store closures and layoffs will help the company save money, but will also have a huge impact on revenue and sales.
With the outlook for physical retail stores bleak for 2018, many are questioning whether these drastic cost-cutting measures will be enough to save Sears Holdings Corp from an “out of business” sale.
“Sears Holdings Announces Plan to Enhance Liquidity and Accelerate Return to Profitability,” Sears Holdings Corp, January 10, 2018.
“Sears is closing over 100 more stores,” CNBC, January 4, 2018.
“Sears is closing 63 more stores,” CNBC, November 3, 2017.
“Sears Holdings Reports Third Quarter 2017 Results,” Sears Holdings Corp, November 30, 2017.
“Store Closures (11/2/17),” Sears Holdings Corp, November 2, 2017.
“Store Closures (1/4/18),” Sears Holdings Corp, January 4, 2018.