Lampert doubles down on promises as a lawsuit looms
Sears Holdings made headlines again on Friday when it announced an aggressive new plan to lower its debt burden and cut annual expenses by at least $1 billion. Less triumphantly, CEO Edward Lampert is also in the midst of settling a shareholder lawsuit.
Nevertheless, shares of Sears Holdings Corp. were up roughly 30% at press time on Friday in response to the news.
Sears will be looking to drastically reduce overhead, as well as cut debt and pension obligations by $1.5 billion. The company will also be looking to more closely integrate its Sears and Kmart operations.
These cost savings will include previously announced plans to close 108 Kmart and 42 Sears stores.
"We significantly improved our operating performance and made progress toward profitability in the fourth quarter of 2016," said Lampert in a statement. "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."
Sears will also be evaluating potential in-store partnerships, sub-divisions, and reformatting to support its Integrated Retail model, as well as options for its Kenmore and DieHard brands, as well as its Sears Home Services and Sears Auto Centers business through partnerships, joint ventures or other means.
"We believe the actions outlined today 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," added Lampert. "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 full statement (and fiscal details) can be found here.
Meanwhile, Business Insider reports that Lampert and his hedge fund are settling a shareholder lawsuit for $40 million, which alleges that he profited financially from stripping Sears of its best assets.
The suit is being brought against Lampert's real estate investment trust, Seritage Growth Properties.
Lampert sold several Sears locations (many of its most profitable) to Seritage and then rented the stores back from the REIT.
According to the lawsuit, those Sears stores were worth much more than the $2.7 billion Seritage paid for them, and that Lampert was in a win-win situation, profiting from both ends of the deal.
For more on what both the plaintiffs and defendants are saying, click here.
Readers Respond: Build the wall?
The week began with a flurry of controversy from 84 Lumber's Super Bowl ad, which followed an immigrant family as they made their way to the United States in search of a better life.
The reactions were mixed in the world at large, but it seems that among HBSDealer readers, majority support for President Trump's border wall persists.
In a reader poll earlier this week, we asked, "It has been suggested that a border wall should be built between the U.S. and Mexico. What's your take?"
Most respondents (64%) answered: "Good idea. Border security is essential. And good fences make good neighbors."
Another 33% said: "Bad idea. Waste of resources. Wrong message. Ineffective."
The only truly unpopular vote for such a hot-button issue, it seems, was the neutral one. Only 3% said they had no opinion.
What's your take? There's still time to vote.