What happened
Shares of Sears Holdings Corp (SHLDQ) appeared to be awaiting their death knell today after The Wall Street Journal reported that the company could file for bankruptcy as soon as this week. Yesterday, the ailing retailer named a restructuring expert to its board, and last night, the Journal said Sears had hired M-III Partners, a small advisory firm, to put together a bankruptcy filing as early as this week.
As a result, Sears stock had tumbled 36.5% as of 11:54 a.m. EDT.
Image source: Sears.
So what
Sears actually hired M-III a few weeks ago as the retailer has a $134 million debt payment looming for Monday, October 15, that it may not be able to meet.
In order to stave off a bankruptcy, CEO Eddie Lampert proposed a $1 billion debt restructuring last month, and he said Sears should sell $1.5 billion in real estate from other assets worth $1.75 billion, including the Kenmore appliance brand, which his hedge fund, ESL Investments, offered to buy.
Now what
Sears's bankruptcy has long been anticipated as the company has been losing money since 2010 and making desperate bids to stay afloat, including selling or spinning off brands like Craftsman tools and Lands End apparel, and closing unprofitable stores. Today's Sears store count, at around 900, is just half of what it was five years ago, and comparable sales have continued to fall. Annual losses have been in the range of hundreds of millions of dollars.
Lampert's own financial maneuvering helped keep the company afloat longer than it would have been, but if the company doesn't accept his restructuring proposal, it looks like bankruptcy is the only option. No company, even one as storied as Sears, can lose money forever. Look for an announcement in the coming days.
