US retail giant Sears Holdings Corp has announced the next series of steps – including the potential sale of a further 140 properties – as part of its efforts to return to profitability.
The company has struck a deal with the Pension Benefit Guaranty Corporation (PBGC) to release about 140 Sears properties from a ring-fence arrangement in exchange for US$407m of contributions to its pension plans.
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According to Sears, the agreement provides the company with financial flexibility through the ability to monetise properties, and in addition, provides funding relief from contributions to the pension plans for the next two years.
“This agreement with the PBGC is another positive step forward which, upon closing, will provide our company with financial flexibility while supporting our commitment to honour our obligations to the associates and retirees covered by the pension plans,” said CEO Edward Lampert. “While the lower interest rate environment has had a significant, unfavourable impact on the pension plans’ funding, Sears Holdings has demonstrated its commitment to honouring this obligation.”
The company also pre-announced its third-quarter earnings, warning it expects to book a net loss of between $595m and $525m for the period, compared to a net loss of $748m last year.
Sears said the retail environment “remains challenging, with continued pressures on sales” as total revenues slipped to about $3.7bn from $5bn in the prior year quarter, with store closures contributing to over half of the decline.
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By GlobalDataMeanwhile, total comparable store sales declined 15.3% during the period, with Kmart comparable store sales down 13%, and comparable store sales at Sears down 17%.
However, Sears says that despite the challenges in the retail environment, it expects to deliver its second consecutive quarter of at least $100m improvement in adjusted EBITDA as the restructuring actions taken in the first three quarters of 2017, including closure of unprofitable stores, have resulted in “meaningful improvement” in its performance. Adjusted EBITDA is expected to improve by around $100m.
