Sears Cuts 400 Jobs in Turnaround Plan -- Update

By Imani Moise Features Dow Jones Newswires

Sears Holdings Corp. on Tuesday said it is cutting 400 jobs at its corporate offices as part of its restructuring plan.

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The struggling retailer said the bulk of job cuts will be at its Hoffman Estates, Ill., headquarters, adding that it worked to leave open positions unfilled and reduce contract workers before cutting full-time jobs.

The planned job cuts are in addition to the $1.25 billion restructuring plan the company unveiled earlier this year. Sears Holdings said that so far, actions such as paying down debt, cutting expenses and reducing the size of its pension plan have created $1 billion in annualized cost savings.

The owner of Kmart and Sears stores raised doubts in March that it could generate enough money to cover its obligations over the next 12 months. The company said the disclosure was triggered by an accounting rule that recently took effect and didn't reflect management's expectations for the business's near-term health.

Separate on Tuesday, Sears Canada Inc., which was partially spun off from Sears Holdings, for the first time cast doubt on its own ability to continue operating after struggling to cobble together necessary financing.

The Canadian retailer, which has been operating at a loss since 2014, said it had expected to borrow up to $175 million against its real estate, but negotiations with lenders revealed it could only raise up to $109 million. Without an additional cash infusion, the company warned it might not generate enough money from operations to meet its obligations coming due within the next year.

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Financial adviser BMO Capital Markets and lawyers at Osler Hoskin & Harcourt LLP will advise Sears Canada on its options, which the company said could include a financial restructuring or a sale.

Sears Holdings has been selling large chunks of its real estate and brands to stay alive, but the lack of lenders willing to provide liquidity is a sign that shedding assets to fund losses has its limits.

At the end of April, Sears Holdings had $70 million left to borrow on its credit line. The company used $1 billion of the $1.5 billion of the revolving credit facility, but total borrowings under the loan are restricted based on certain financial measures, as well as its inventory and receivables balances.

The company said it pushed back payments on $400 million in debt due soon and paid down about $418 million of debt. It also announced Stephan Zoll, president of its online unit, is leaving his position.

Sears Holdings Chief Executive Edward Lampert owns about 45% of Sears Canada, in part through his hedge fund, ESL Investments Inc. Sears holds an additional 12% stake in the company.

Sears Holdings stock was down 3% to $6.82 in recent trading.

Sears Canada stock was trading at about 60 cents and has lost nearly three-quarters of its value so far this year on the Toronto Stock Exchange.

Andrew Scurria contributed to this article

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

June 13, 2017 11:43 ET (15:43 GMT)