Sears Declares Bankruptcy, Lampert Steps Down As CEO

Over the last five years, Sears Holdings Corp SHLD's stock has fallen nearly 100 percent. Now, near it’s seeming nadir, Sears continues to plummet.

What Happened

On Monday, management declared Chapter 11 bankruptcy and announced an immediate CEO change for the 126-year-old company.

CEO Edward Lampert will remain chairman of the board, but executive leadership will be granted to a new Office of CEO occupied by CFO Robert Riecker, Chief Digital Officer Leena Munjal, and President of Apparel and Footwear Gregory Ladley.

With a new independent restructuring committee, the firm will also accelerate “strategic transformation” with 142 store closures, considered sales of stores and assets, and reorganization around a smaller store platform comprised of locations boasting positive earnings before interest, tax, depreciation and amortization.

In the meantime, Sears will attempt financial restructuring with $300 million in senior debtor-in-possession financing secured from revolving lenders and is currently negotiating another $300 million in junior debtor-in-possession financing from Lampert’s ESL Investments, Inc., Sears’ largest shareholder.

Why It’s Important

Sears’ liquidity position has long hindered recovery efforts, according to leadership.

“The Chapter 11 process will give 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,” Lampert said in a press release.

Critics have attributed many of the company’s woes to Lampert, who withheld resources from new ventures and store remodeling and expansion. Since he took leadership in 2013, the firm has closed 72 percent of stores and lost 68,000 employees. It now loses $125 million per month.

What’s Next

Management confirmed its Sears and Kmart starts and electronic platforms will remain open for business, continue paying wages and honoring member programs, and see “operations continue in normal course.” It intends to complete restructuring “as expeditiously as possible.”

The firm is in sale talks with ESL for a significant portion of stores, and it will close the 142 unprofitable stores by the end of the year. Liquidation sales at those sites will begin soon.

The stock was down about 10 percent to 37 cents per share in Monday's pre-market session.

Related Links:

Morgan Stanley: A Sears Bankruptcy Could Benefit J.C. Penney

Sears Could Be One Step Closer To Bankruptcy

Photo credit: Miosotis Jade, from Wikimedia Commons