US department store giant Sears has filed for chapter 11 bankruptcy protection, after struggling with debts and losses in the American retail market.
The business operates 700 stores in the US, and has filed for bankruptcy protection with a court in New York, aiming to use the measure to cut debts and continue trading over the US holiday period of Thanksgiving. Sears will close 142 of its stores in an effort to reduce costs.
Parent company Sears Holdings also owns the US retailer Kmart, and in a statement the business said both retailers would continue trading in stores and online. It intends to continue to pay all employee wages and suppliers for services up to the date of the filing.
Over the past five years the company is reported to have lost around $5.8bn (£4.42bn), and closed over a thousand stores in the last decade, as it battled to compete with the rise of ecommerce. It is thought to have had a debt payment of $134m (£102m) due today (15 October).
Commenting on the announcement in a statement, Edward Lampert, chairman of Sears Holdings, said: “Over the last several years, we have worked hard to transform our business and unlock the value of our assets. While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.
The Chapter 11 process will give [Sears] Holdings the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability. Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities.”
Commenting on the news, Neil Saunders, managing director of GlobalData, flagged that the closure was disappointing, but not surprising. “That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure,” he said. “However, it is not surprising because this is a destination that Sears has been headed towards for many years, with virtually no serious attempt having ever been made to change the trajectory.”
“In our view there are a multitude of factors that have contributed to Sears’ demise, but foremost among them is management’s failure to understand retail and evolve Sears in a way that would have given the chain a fair chance of survival. Although the present leadership team needs to shoulder much of the responsibility, the missteps arguably go back to the 1980s when Sears became too diversified and lost the deftness that had once made it the world’s largest and most innovative retailer.”