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Sears takes new steps to stay afloat

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HOFFMAN ESTATES, Ill. — Sears Holdings Corp. has announced it will seek to cut costs this year by $1 billion and trim debt and pension obligations by at least $1.5 billion.

The company, which reported its sixth straight quarter of slumping sales, will undertake a restructuring, including a combination of the corporate functions of Sears and Kmart. It will also seek to improve merchandising, supply chain and inventory ­management.

Some of the $1 billion in targeted cost cutting will come from the retailer’s recently announced plans to shutter 108 unprofitable Kmart stores and 42 underperforming Sears outlets. It sold five full-line Sears stores and two auto centers in January for $72.5 million, and has engaged Eastdil Secured to garner at least $1 billion from the real estate sales. Over the past decade, the company has shuttered, sold or spun off more than 2,000 stores.

“We significantly improved our operating performance and made progress toward profitability in the fourth quarter,” said chairman and chief executive officer Edward Lampert. “In the first several weeks of 2017, we undertook a series of transactions to optimize our capital structure and unlock value across our wide range of assets. We also reached an agreement to amend our asset-based credit facility, which further enhances our liquidity and financial flexibility. Furthermore, we intend to use net proceeds from our announced Craftsman and real ­estate transactions, as well as from improvements in the operating performance of the company, to meaningfully reduce our outstanding obligations and their associated expenses.”

The actions “will reduce our overall cash funding requirements and ensure that Sears Holdings becomes a more agile and competitive retailer with a clear path toward profitability,” Lampert added. “In addition, we believe these actions will enable us to focus our investments to drive our strategic transformation and the evolution of our Shop Your Way ecosystem through value-enhancing partnerships, compelling offerings and a seamless online and in-store shopping experience for our members.”

The company said it would optimize product assortments at Sears and Kmart, using data analytics to better align with the preferences of best members, focusing on profitable, high-return categories.

At least one analyst was unimpressed. “They’ve been losing market share for years, and we don’t see a turnaround in the business.” Monica Aggarwal, a managing director with Fitch Ratings, told The Wall Street Journal.


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