• US retail giant Sears Holdings Corp has outlined its latest bid to return to profitability.
  • The plan, it says, will enhance liquidity and obtain the support of outside lenders and its vendor community.
  • Should these efforts fail, the board will "consider all other options".

Embattled retailer Sears Holdings has identified US$200m in additional cost savings it can make this year and secured more financing as part of a new plan it says will enhance liquidity and accelerate its return to profitability.

As part of its ongoing efforts, the US retail giant has taken a series of steps over the course of the last 18 months including, most recently, the closure of an additional 39 Sears and 64 Kmart stores and striking a deal to extend the maturity of its existing term loan.

Sears to shutter another 103 stores

Sears extends term loan maturity

Now, CEO Eddie Lampert says while these actions have so far helped the company survive the so-called "Retail Apocalypse", many observers are not persuaded that Sears can be a viable competitor in the long term.

"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," he wrote in a blog post this week.

As a result, Lampert says Sears will pursue "broader, more fundamental changes" in its capital structure and business model, so the company can move forward with greater financial flexibility and more capital to invest in what he calls the most promising areas of the business.

To accomplish these objectives, Lampert says Sears has:

  • Initiated a series of financial transactions to raise an incremental US$300m in new liquidity, of which $100m was already received.
  • Amended it's existing 2018 second lien notes to loosen certain collateral coverage restrictions and are also in discussions with certain lenders regarding additional transactions that would improve the terms on potentially more than $1bn of its non-first lien debt.
  • Identified $200m of cost savings, unrelated to store closures, to achieve its goal of returning to profitability in 2018.

"As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility," says CFO Rob Riecker. "The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business."

Sears adds should the company's efforts to complete these transactions not be fully successful, the board will consider all other options to maximise the value of its assets.

Last month, an investor in the company called for it to consider its options – including going private – amid 24 straight quarters of sales declines.

Investor urges Sears to consider going private