In a story Jan. 10 about department store chain Sears Holdings Corp. obtaining new financing, The Associated Press incorrectly quoted Jude Gorman, general counsel at Reorg, a research firm that follows distressed companies. Gorman referred to the "principal" question, not the "principled" question.
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A corrected version of the story is below:
Sears raises $100M in new financing, eyes $200M in cost cuts
Sears is raising $100 million in new financing, will seek twice that from other sources, and will attempt $200 million in additional cost cuts this year
By ANNE D'INNOCENZIO and MICHELLE CHAPMAN
AP Business Writers
NEW YORK (AP) — Sears has secured more financing, and is eying more cost cutting, as the beleaguered retailer reported a big sales drop during the critical holiday season.
The company, which operates Sears and Kmart stores, said Wednesday that it secured $100 million in new financing, will seek twice that from other sources, and will attempt $200 million in additional cost cuts this year unrelated to store closings. It also warned that if the company's efforts to complete these transactions are not fully successful, then the board will consider all other options to maximize the value of its assets.
Sears Holdings Corp., which said last week it's closing more than 100 stores, said that during the November and December period, comparable-store sales tumbled by 16 percent to 17 percent. The metric — which measures sales in stores open at least a year — is a key indicator of retailer's health.
Sears' disastrous holiday sales mark a sharp contrast to the solid gains enjoyed by many of its department store peers such as Kohl's, J.C. Penney and Macy's.
Many retailers are enjoying the benefits of a stronger economy and lower unemployment. But they're also seeing their efforts to spruce up their stores while expanding online services helping to boost their business. In comparison, Sears hasn't kept up with the likes of Walmart, Best Buy and Home Depot in investing in its stores, with its shabby fleet its biggest albatross. Moreover, its peers like J.C. Penney are going after Sears' core appliance business. Sears has been trying to increase cash reserves while it cuts costs, moves that seem more urgent after it raised doubts in a regulatory filing last March that it may not continue as a going concern. However, it insisted at the time that its actions to turn around the business should help reduce that risk.
The inability to revive sales has created tension with vendors who have grown apprehensive about payment. Sears, based in Hoffman Estates, Illinois, just outside of Chicago, has not reported an annual profit since 2011, and sales have been in decline for a decade. In a blog post published Wednesday, Chairman and CEO Edward Lampert says that while spats between itself and vendors have been "exaggerated by some in the media, various vendors and other providers to the company have taken or threatened actions that have had a major impact on our operations and liquidity."
In fact, Sears announced in October that it will no longer sell Whirlpool appliances, ending a business relationship that dates back more than 100 years. That includes the larger appliances and small kitchen appliances of Whirlpool subsidiaries like Maytag, KitchenAid and Jenn-Air. It said Whirlpool was making demands that would've made it difficult to sell its appliances at a competitive price.
"I think the principal question is, is there any reason for Sears to exist in 2018?" said Jude Gorman, general counsel at Reorg, a research firm that follows distressed companies. "The answer is probably no." But Reorg executives say a lot will depend on Lampert. His hedge fund has forwarded millions in funding to keep Sears open. Lampert said Wednesday that broader changes to the company's capital structure and business model were required.
"While these actions have so far helped our company survive the so-called 'Retail Apocalypse,' many observers are not persuaded that Sears Holdings can be a viable competitor in the long term," Lampert wrote in a blog post. "It is obvious that to overcome such skepticism and obtain the support of outside lenders and our vendor community - which is crucial to the success of any retailer - we need to undertake further measures."
The goal, Lampert said, is to return Sears to profitability this year.
Shares rose 26 cents, or nearly 8 percent, to $3.39 in afternoon trading Wednesday.
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