Sears files Chapter 11 bankruptcy petition and appoints chief restructuring officer

Sears faces an uncertain future. The parent company of the US-based department store group, Sears Holding Corp., filed today a voluntary Chapter 11 petition seeking bankruptcy court protection in White Plains, New York. The petition included assets worth 6.94 billion dollars (6.02 billion euros) and total liabilities of 11.34 billion dollars (9.8 billion euros). In addition, the company has appointed Mohsin Y. Meghji, managing director of M-III Partners, as its chief restructuring officer.

“The Chapter 11 process will give [Sears] Holdings the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model and return to profitability”, said Edward S. Lampert, chief executive officer. “Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities”, he added.

The company is holding negotiations with the ESL Investments fund, leaded by Lampert, to obtain additional resources for a sum of 300 million dollars. By the end of the year, the group plans to shut down further 142 non-profitable stores.

Sears operated over 3,500 stores in 2005 and, by the end of fiscal 2018, it will have less than 700 brick-and-mortar shops

Following Sears’ Chapter 11 filing, Lampert has abandoned the chief executive role, even though he will continue as chairman of the company. From now on, the group has created an Office of the CEO unit, which includes three high-rank executives: Robert A. Riecker, chief financial officer; Leena Munjal, chief digital officer, customer experience and integrated retail, and Gregory Ladley, president of apparel and footwear.

Sears has been immersed in a restructuring process for over a decade. After completing the merger process with Kmart Holding, ended in 2005 and turning the company into an 11 billion dollars juggernaut, Lampert acquired the bulk of Kmart’s debt through its investment vehicle ESL.

However, despite the good prospects for both Sears and Kmart retail chains after the merger, the start of the financial crisis in the United States and the ever-increasing competition from the online world, with pure players such as Amazon, gradually diminished Sears’ revenues. The company doesn’t post a quarter with profits since 2010, according to WWD.

After entering red figures, Lampert began selling some of the company best assets to maintain high cash levels and keep operations afloat. Sears sold the Craftsman brand to home equipment retailer Stanley Black&Decker in 2017 for 900 million dollars (778 million euros). Besides, ESL Investment is trying to acquire the Kenmore home appliances label for some 400 million dollars (346 million euros).

In 2005, after the merger with Kmart, Sears operated with more than 3,500 stores. However, during the last few years, the company has closed down hundreds of shops, ending last August with 866 stores. With the closures forecasted for the remainder of the year, the group expects to operate with less than 700 points of sale by the end of fiscal 2018.