Sears has taken new steps to boost its liquidity as it struggles to hang on amid another dismal holiday quarter.
Through a series of maneuvers that include selling its Craftsman business to Stanley Black & Decker and closing 150 unprofitable Sears and Kmart stores, the department store chain has cobbled together more than $1 billion in liquidity, with plans to raise another $1 billion off of its real estate.
(A full list of planned store closures is below.)
Sears shares rallied on the news, and were trading up 5 percent at $10.89.
The announcements come as Sears disclosed that same-store sales at its chains declined 12 percent to 13 percent in the first two months of the holiday quarter. The chain has reported just two profitable quarters since April 2012.
"We are taking strong, decisive actions today to stabilize the company and improve our financial flexibility in what remains a challenging retail environment," Sears Chairman and CEO Eddie Lampert said in a statement Thursday. "We are committed to improving short-term operating performance in order to achieve our long-term transformation."
Details regarding Sears' latest financial maneuvers started to trickle out Wednesday, when Seritage Growth Properties — the real estate investment trust that was spun off from Sears — said in an SEC filing that Sears had exercised its right to terminate the leases on 19 unprofitable stores it had sold off to the firm.
Also Wednesday, the company released a more complete list of 150 Sears and Kmart stores it plans to close, and said it had secured a $500 million loan backed by real estate. The company had previously announced a standby letter of credit facility for up to $500 million. That was backed by affiliates of Lampert's hedge fund, ESL. Combined, these two infusions will generate $1 billion in liquidity.
Sears also announced a long-awaited sale of its Craftsman brand for a cumulative $775 million to Stanley Black & Decker. At closing, Sears will receive $525 million in cash. It will receive the rest in cash at the end of the third year. Sears will also receive annual payments of 2.5 percent to 3.5 percent on new Black & Decker sales of Craftsman products for 15 years.
What's at stake for Lampert
In addition to these moves, Sears is looking for additional ways to boost its liquidity by another $1 billion through its real estate. The 150 stores that Sears planned to close generated some $1.2 billion in sales over the past year; however, they also recorded an adjusted loss of roughly $60 million.
"The decision to close stores is a difficult but necessary step as we take actions to strengthen the company's operations and fund its transformation," Lampert said.
"Going forward, Sears will be more focused on our Shop Your Way membership platform, a network with tens of millions of active members, and our Integrated Retail strategy in order to be a more nimble, innovative and relevant retailer that is better able to provide value and convenience to our customers," Lampert said. "We are confident that concentrating on these key initiatives will lay the foundation for growth over the long-term."
Though many have said a Chapter 11 filing is an all-but-certain part of Sears' future, others argue it would not be in the CEO's best interest. That's because Lampert and members of Sears' board own almost all of the company's unsecured debt. In November, Bruce Berkowitz — the founder or Fairholme Capital Management and a member of Sears' board — said his firm owned 57 percent of Sears' senior unsecured notes due in 2019.
"Everyone seems obsessed about whether Sears is going to 'file' or not 'file,' while for all practical purposes they are currently going through the equivalent of a bankruptcy restructuring process in public with ESL leading the [debtor-in-possession] financing," Don Ingham, a managing director at Tenth Avenue Holdings, told CNBC Thursday.
"The main thing that they might be able to accomplish by an actual filing would be to accelerate the closing of unprofitable stores in a more efficient manner, but this could come at the cost of losing control of the process of maximizing the value of some of the assets," said Ingham, whose firm has a stake in both Sears' equity and debt.
Already, some 80 percent of Sears' leased Kmart stores come up for renewal in less than five years, as do nearly half of its leased Sears stores.
Sears' short-term borrowings totaled $618 million at the end of the third quarter. At that time, it had $3.7 billion in long-term debt.
Sears closures announced 1/4/2017
Albany Mall, Albany, GA*
5555 Whittlesey Blvd, Columbus, GA
1235 S Reed Road, Kokomo, IN
2259 S 9th St., Salina, KS
9001 Cortana Mall, Baton Rouge / Cortana, LA*
197 Westbank Expressway, Gretna, LA*
3099 28th St SE, Grand Rapids, MI*
12737 Riverdale Blvd NW, Coon Rapids, MN*
1850 Adams St, Mankato, MN*
3600 Country Club Dr, Jefferson Cty, MO*
3702 Frederick Ave, Saint Joseph, MO
3902 13th Ave South, Fargo, ND*
1000 S Main St, Roswell, NM
2000 Brittain Road, Akron, OH*
1075 N Bridge St, Chillicothe, OH*
1701 River Valley Circle S, Lancaster, OH*
Richmond Mall, Richmond Hts, OH*
428 SW C Ave, Lawton, OK
1 Susquehanna Valley Mall Dr, Selinsgrove, PA*
1500 Mall Run Road, Uniontown, PA*
3595 Capital City Mall, Camp Hill, PA*
1500 Diamond Hill Road, Woonsocket, RI*
2701 David H Mcleod Blvd, Florence, SC*
2101 Fort Henry Dr, Kingsport, TN*
4101 E 42nd St, Odessa, TX*
500 Gate City Hwy, Bristol, VA*
Sears closures announced 12/27/2016
301 Cox Creek Pkwy, Florence, AL*
1901 S Caraway Road, Jonesboro, AR
90 Elm St; Enfield Sq, Enfield, CT
301 Eagle Ridge Dr, Lake Wales, FL*
5101 Hinkleville Road, Paducah, KY*
262 Swansea Mall Drive, Swansea, MA*
10 Whitten Road, Augusta, ME*
1261 Niagara Falls Blvd, Amherst, NY*
2000 Walden Ave, Cheektowaga, NY*
1 N Galleria Dr, Middletown, NY*
9605 Queens Blvd, Rego Park, NY
1901 S Yale Ave, Tulsa, OK
3245 E State St, Hermitage/Sharon, PA
18600 Alderwood Mall Pkwy, Lynnwood, WA*
225 Meadowbrook Road, Bridgeport, WV
Towne Center Mall, Charleston, WV*
Kmart closures announced 1/4/2017
3600 Wilson Road, Bakersfield, CA
25 West Polk Street, Coalinga, CA
333 Sierra Street, Kingsburg, CA
363 S Broadway, Denver, CO
2809 North Ave., Grand Junction, CO
45 Shunpike Road, Cromwell, CT
3200 Macon Road, Columbus, GA
365 Habersham Village Circle, Cornelia, GA
1601 Highway 40 East, Kingsland, GA
2600 Dodge Street, Dubuque, IA
5700 Gordon Drive, Sioux City, IA
3810 University Avenue, Waterloo, IA
2851 Belt Line Parkway, Alton, IL
3655 Nameoki Road, Granite City, IL
750 Indian Boundary Road, Chesterton, IN
1460 West State Road 2, La Porte, IN
4820 S 4th St Trafficway, Leavenworth, KS
4200 W Kellogg Dr, Wichita, KS
115 South Airline Hwy, Gonzales, LA
1400 S Clearview Parkwa, New Orleans, LA
29600 Ford Road, Garden City, MI
3555 O'Neill Drive, Jackson, MI
1396 South Main Street, Adrian, MI
5400 S Cedar Street, Lansing, MI
1501 E Apple Ave., Muskegon, MI
40855 Ann Arbor Road, Plymouth, MI
17580 Frazho Road, Roseville, MI
3541 Highland Road, Waterford, MI
165 Wayne Road, Westland, MI
6455 US 31 N, Acme Township, MI
1305 Highway 10 West, Detroit Lakes, MN
1477 State Highway 248, Branson, MO
2304 Missouri Blvd., Jefferson City, MO
1003 S Bishop Ave., Rolla, MO
3101 S Glenstone Ave., Springfield, MO
6650 Manchester Ave., St Louis, MO
545 US Hwy 29 North, Concord, NC
1931 Skibo Road, Fayetteville, NC
201 N Berkeley Blvd., Goldsboro, NC
102 New Market, Madison, NC
815 S College Road, Wilmington, NC
1468 Clementon Road, Clementon, NJ
645 Highway 18, East Brunswick, NJ
800 Black Horse Pike, Pleasantville, NJ
Rte 9 & Rte 47, Rio Grande, NJ
10405 S Eastern Ave., Henderson, NV
1500 Coshocton Ave., Mount Vernon, OH
185 Upper River Road, Gallipolis, OH
1005 East Columbus St., Kenton, OH
225 West Avenue, New Boston, OH
1284 Brice Road, Reynoldsburg, OH
I-70 & Mall Road, St. Clairsville, OH
3515 N Maple Avenue, Zanesville, OH
4 East Shawnee St., Muskogee, OK
5820 Shaffer Road, Dubois, PA
1320 E Grandview Blvd., Erie, PA
1890 Fruitville Pike, Lancaster, PA
5600 Carlisle Pike US 11, Mechanicsburg, PA
120 Mall Blvd, Monroeville, PA
100 Cross Roads Plz, Mt. Pleasant, PA
3801 B Clemson Blvd., Anderson, SC
254 Highway 72 By-Pass, Greenwood, SC
8571 Rivers Avenue, North Charleston, SC
3020 W 12th St., Sioux Falls, SD
305 W Economy Road, Morristown, TN
1120 Mc Rae Blvd., El Paso, TX
9484 Dyer St., El Paso, TX
1101 Fort Hood Street, Killeen, TX
3061 S John Redditt Dr., Lufkin, TX
1153 W Highway 40, Vernal, UT
2010 N Main St., Layton, UT
1419 Hershberger Road N W, Roanoke, VA
3655 Plank Road, Fredericksburg, VA
6101 N Military Hwy., Norfolk, VA
1355 West Main Street, Salem, VA
1425 E Highway 151, Platteville, WI
2211 S Green Bay Road, Racine, WI
1840 Dell Range Blvd., Cheyenne, WY
Kmart closures announced 12/27/2016
300 Highway 78 E, Jasper, AL
2003 US Hwy 280 Bypass, Phenix City, AL
3001 Iowa Avenue, Riverside, CA
501 N Beneva Road, Sarasota, FL
1801 Northwest Hwy 19, Crystal River, FL
15271 Mcgregor Blvd, Fort Myers, FL
2111 S Federal Hwy, Fort Pierce, FL
1501 Normandy Village, Jacksonville, FL
2211 W Irlo Bronson Hwy, Kissimmee, FL
19400 Cochran Blvd, Port Charlotte, FL
4955 Golden Gate Parkway, Naples, FL
111 Town & Country Drive, Palatka, FL
33 W Montgomery Cross Road, Savannah, GA
4561 Salt Lake Blvd, Halawa /Honolulu, HI
191 Outer Loop Road, Louisville, KY
2945 Scottsville Road, Bowling Green, KY
14662 N US Highway 25 East, Corbin, KY
1501 Paris Pike, Georgetown, KY
3010 Fort Campbell Blvd, Hopkinsville, KY
1710 West Highway 192, London, KY
2815 West Parrish Avenue, Owensboro, KY
9 Plaza Way, Fairhaven, MA
1130 Newport Avenue South, Attleboro, MA
222 N Point Blvd, Baltimore, MD
688 Hogan Road, Bangor, ME
4645 Commercial Drive, New Hartford, NY
5132 6th Ave, Tacoma, WA
731 Beverly Pike, Elkins, WV
1050 Division Street, Parkersburg, WV
250 Three Springs Drive, Weirton, WV