The corporate owner of Sears and Kmart on Tuesday said that there was “substantial doubt” that it could continue operating, as brick-and-mortar stores continue to face challenges in an e-commerce world.
In a filing with the US Securities and Exchange Commission, the corporate owner, Sears Holdings Corp, cited its efforts to cut costs, sell property, tap new funding sources and make other moves to stanch the flow of red ink.
Still, it reported a US$2.2 billion loss for last year and said it had to use money from its investments and financing activities to fund operations.
“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” it said in the filing, its annual report.
The disclosure is a setback for the company and for Edward Lampert, the hedge fund manager who engineered the combination of the two legends of US retail 13 years ago.
Lampert has shut down stores, reshuffled the company’s organization and pushed to have a greater online presence.
Still, Sears Holdings has lost more than US$5 billion over the past three years as sales have declined.
On Wednesday morning, in the first day of trading after the disclosure, shares in the company tumbled more than 13 percent.
Sears, through its catalog, has been a fixture of US homes for more than a century. Kmart, which has its own lengthy history beginning as a five-and-dime store in Detroit, became a major national presence in the 1960s as a big-box department store, with blue-light special discounts geared toward penny-wise middle-class Americans.
However, both brands were squeezed by Wal-Mart Stores Inc, with its heavy discounts, and Target Corp, which sells affordable goods, but with more design and flair.
Both Sears and Kmart also suffered because they were in older shopping malls and neighborhoods. Online retailing, with the rise of the likes of Amazon.com Inc, presented a more recent challenge.
To cope, Sears Holdings has been shrinking. This month, it sold its Craftsman tool brand to Stanley Black & Decker Inc in a deal valued at more than US$775 million.
Still, its long-term debt as of January totaled about US$4.2 billion, almost double from the same period the previous year, according to the filing.
Last month, Sears Holdings said it had started a restructuring program that it said would save US$1 billion annually.
The program is focused on streamlining its back-office corporate and support functions, tweaking its product offerings and supply chain and looking for ways to reshuffle its real-estate portfolio.
As of January, Sears Holdings had 1,430 Sears and Kmart stores in the US. By contrast, a decade ago it had about 3,800 stores in the US and Canada.
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