Stocks Rise After Sears Bankruptcy Rumors
Posted: Friday, February 10th, 2017 at 2:12 am
Sears most recent quarter was dreadful. Sales during the holidays plummeted, and money continued to be lost. However, delaying bankruptcy might be the only hope for this iconic company.
Sears, who also owns Kmart, showed an increase in shares over 30% on Friday after announcing proposed plans to reduce annual operating costs by $1 billion and reducing $1.5 billion in debt and pensions.
In an attempt to close more stores and invest in online retail, Sears has revised an existing deal allowing Sears to borrow $140 billion more from creditors.
The deal came a few days after investors were growing anxious, the debt was growing and the sales continued to decline as Sears shares were reaching rock bottom.
Sears CEO, Eddie Lampert, plans to cut operating costs by combining operations between Sears and Kmart, and improving merchandising and supply chain management.
“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,” Lampert said.
With these changes, Sears is attempting to change the appreance of the declining business.
Sears plans to close 150 Sears and Kmart stores which according to Lampert these store closures will be a cost savings of $1 billion dollars.
In order to avoid vendors and lenders cutting off supplies, Lampert has been advised to deny bankruptcy rumors.
Lampert has done what he can over the past years to try and increase cash flow and ward off bankruptcy.
Sears has been looking to sell its Kenmore appliances line and auto parts. Recently, they sold the Craftsman brand to Stanley Black and Decker.
Sears Hometown, Outlet stores, Lands’ End and Sears Canada have also been spun off.
Seritage Growth Properties is a separate public company created for real estate assets. Warren Buffet, a stock market genius, has invested in the company, although, Wall Street is still skeptical.
Sears may still be left standing despite the more than 15% decrease in shares this year.
Before the news of the new deal on Friday, Sears shares were almost at $5, an amount that usually results in investors selling the stock because they don’t want to own what will eventually become a penny stock.
On Friday Sears shares were trading at about $7.25 in the morning.
Sears is not the only retailer suffering in today’s market. Another big retailer, Macy’s, has announced it will be closing stores and has been approached by Saks and Lord & Taylor about acquisition.
Other retailers are also struggling such as Kohl’s and JC Penny. Competition is high from Amazon, Target, and Walmart.