© 2024 Kansas City Public Radio
NPR in Kansas City
Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

Can Sears Survive? Maybe Not, Company Admits In Financial Filings

Sears, once the monolith of American retail, says that there is "substantial doubt" that it will be able to keep its doors open. Company shares tumbled more than 12 percent Wednesday. Above, the department store's location in Brooklyn's Flatbush neighborhood today.
Bebeto Matthews

Sears used to be the titan of American retailing. But now its future is in doubt.

Shares of the company's stock tumbled 12 percent today after the company acknowledged Tuesday in its annual 10-K filing that its future viability is not a sure thing. A 10-K is a report that public companies file with the Securities and Exchange Commission, giving a comprehensive summary of the company's financial performance.

"Our historical operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern," the company reported. The company says that it is taking steps to improve its financial position. However, "we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned," it said.

Sears Holdings' CEO, Eddie Lampert, is a hedge fund manager who is also the company's biggest investor. He has been attempting to orchestrate a turnaround for the brand, which struggles to survive in a retail environment that has become increasingly tricky for physical stores.

Sales at locations of Sears and Kmart that have been open at least a year dropped 10.3 percent in the fourth quarter of 2016, the Associated Press reports.

Earlier this month, Sears sold off its Craftsman brand of tools to Stanley Black & Decker. The company plans to use the profits from that sale to shore up its pension plan, which Sears acknowledges ties up a significant portion of the company's cash on an annual basis.

A blog post from Sears Holdings' chief financial officer Jason Hollar seeks to focus attention on what the company is doing to mitigate the risks associated with the company's current financial situation. "[W]e are firmly focused on improving the operational performance and financial flexibility of Sears Holdings. This is evident in the decisive actions we have taken in recent months," he writes.

Hollar points to increased liquidity and the restructuring program the company launched last month, which aims to reduce corporate overhead costs and achieve savings through further integration of Sears and Kmart operations.

But Noel Hebert, an analyst at Bloomberg Intelligence, says Sears has "all kinds of issues":

"Though the company has enough cash to get through 2017, there are plenty of troubling signs, he said. Its declining payables-to-inventory ratio, for instance, shows that vendors have been increasingly reluctant to keep the retailer stocked."

The 131-year-old company lost more than $2 billion dollars last year, the AP reports.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

Laurel Wamsley is a reporter for NPR's News Desk. She reports breaking news for NPR's digital coverage, newscasts, and news magazines, as well as occasional features. She was also the lead reporter for NPR's coverage of the 2019 Women's World Cup in France.
KCUR serves the Kansas City region with breaking news and award-winning podcasts.
Your donation helps keep nonprofit journalism free and available for everyone.