HOFFMAN ESTATES, Ill.,
April 21, 2017 /PRNewswire/
-- Sears Holdings Corporation ("Holdings," "we," "us," "our,"
or the "Company") (NASDAQ: SHLD) today provided an update on its
strategic restructuring program, including incremental actions to
increase its annualized cost savings target to $1.25 billion from $1.0
billion. In addition, the Company provided an update on its
efforts to enhance its liquidity and financial flexibility.
"Earlier this year, we initiated a strategic restructuring
program and committed to improving our operating performance and
financial flexibility in a very challenging retail environment,"
said Edward S. Lampert, Chairman and
Chief Executive Officer of Sears Holdings. "While we have made
significant progress in reducing our cost base and enhancing our
member value proposition, we need to take further action.
Accordingly, we will increase our structural cost savings target by
$250 million on an annualized basis
and accelerate our efforts to maximize value from our real estate
portfolio, which we believe will improve our financial flexibility
as we pursue our strategic transformation."
Restructuring Program Update
Sears Holdings has achieved significant progress in its
restructuring program, with $700
million in annualized cost savings already actioned to date.
The initiatives being taken to realize $1.25
billion in annualized cost savings in 2017 include:
- The previously announced closure of 150 non-profitable stores,
comprised of 108 Kmart and 42 Sears locations, which has been
completed;
- The closure of 92 underperforming pharmacy operations in
certain Kmart stores and 50 Sears Auto Center locations;
- Simplification of the organizational structure of Sears
Holdings through consolidation of the leadership of retail
operations for Sears and Kmart and elimination of certain senior
management roles; and
- A comprehensive review of the Company's value chain to identify
broader opportunities for competitively priced products and drive
operational efficiencies.
"Consistent with our ongoing strategy of focusing on our Best
Stores, Best Categories and Best Members, we will continue to take
difficult yet necessary actions. As we sharpen our focus on
profitable areas of our business, we will also continue to closely
evaluate the longer-term viability of stores where a clear path to
return to profitability is not in sight. We are determined to take
all necessary actions to improve the performance of Sears Holdings
and will leverage our lease optionality to reconfigure our stores
and reduce capital obligations," Mr. Lampert said.
In addition to improving its operating performance, the Company
remains focused on its integrated retail strategy and is actively
pursuing a number of new partnerships and other membership
offerings. The actions outlined today will reduce the Company's
overall cash funding requirements and support its continued focus
on the evolution of the Shop Your Way ecosystem to deliver more
value and better services for its members.
Liquidity and Capital Raising Actions
Since the beginning of the calendar year, the Company has
successfully executed numerous transactions to raise additional
capital to fund its operations and continued transformation:
- Closed the previously announced Secured Loan Facility and
standby letter of credit facility, collectively totaling up to
$1.0 billion;
- Amended its existing asset-based credit facility, which
provided an additional $250 million
of availability by increasing the short-term borrowing basket from
$750 million to $1.0 billion;
- Completed the sale of the Craftsman brand to Stanley Black & Decker for a net present
value of over $900 million in cash;
and
- Monetized certain real estate properties for $177.5 million.
The Sears Holdings Board of Directors has also established a
Special Committee of independent directors to market certain real
estate properties. The Special Committee has retained Eastdil
Secured, Centerview Partners, and Weil, Gotshal & Manges LLP as
its advisors. The marketing process is actively proceeding. As of
the date of this release, the Special Committee has received
non-overlapping bids in excess of $700
million on over 60 separate real estate properties. The
Special Committee is expecting additional bids in the near future,
however will withdraw any property for which an acceptable sale
price cannot be obtained. Sales proceeds will be used to reduce
debt and strengthen the Company's balance sheet.
Additionally, Sears Holdings is in discussions with its lenders
to evaluate refinancing options for its secured loan facility
maturing in July 2017. The Company
will provide an update on the status of these efforts prior to the
end of May 2017.
First Quarter Update
The retail environment remained challenging with continued
softness in store traffic and elevated price competition. Since the
beginning of the fiscal year, comparable store sales at Sears and
Kmart declined 11.9% on a combined basis, 10.8% when excluding
consumer electronics, compared to the prior-year period. Despite
the softness in our retail channels, our Home Services business
continued to perform well and we believe it is positioned for
continued growth for the balance of the year. As a result of the
Craftsman transaction and the sale of certain real estate
properties, the Company expects to report positive net income for
the first quarter of 2017. We currently expect that our first
quarter 2017 net income attributable to Sears Holdings'
shareholders will range between $185 million
and $285 million, which excludes the impact of any
additional store closure announcements, real estate sales or
impairments. In addition, we currently expect our first quarter
2017 Adjusted EBITDA will range between $(230) million and $(190) million, compared to
Adjusted EBITDA of $(181) million in
the first quarter of 2016. The Company continues to focus on
reducing inventory and operating expenses, and is taking
incremental actions to improve its performance as outlined
above.
We have provided a reconciliation of Adjusted EBITDA, a non-GAAP
financial measure, to net income attributable to Holdings'
shareholders below.
Chief Financial Officer Appointment
The Company today announced that Rob
Riecker, currently Controller and Head of Capital Market
Activities, has been appointed Chief Financial Officer of Sears
Holdings, effective immediately. Mr. Riecker joined the Company in
2005 as Assistant Controller and served in various senior positions
within the Company's Finance organization. Mr. Riecker succeeds
Jason Hollar, who has resigned from
Sears Holdings to pursue another career opportunity.
"Rob is a strong leader with significant institutional knowledge
through his 11 year tenure with the Company. Rob's financial
acumen, as well as his long-standing relationships with our vendor
and lender partners make him highly qualified for the role. Our
Board of Directors and entire management team have great respect
for Rob and his abilities, and we look forward to working with him
in his new role. We also thank Jason for his contributions to Sears
Holdings and wish him well on his next venture," Mr. Lampert
said.
Adjusted EBITDA Reconciliation
In addition to our net income attributable to Sears Holdings'
shareholders determined in accordance with Generally Accepted
Accounting Principles ("GAAP"), for purposes of evaluating
operating performance, we use Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization ("Adjusted EBITDA"), which is
a non-GAAP measure. The table set forth below provides a
reconciliation of as-adjusted amounts to net income attributable to
Holdings' shareholders, the most directly comparable GAAP financial
measure. We believe that our use of Adjusted EBITDA provides an
appropriate measure for investors to use in assessing our
performance across periods, given that these measures provide
adjustments for certain significant items, which may vary
significantly from period to period, improving the comparability of
year-to-year results and is therefore representative of our ongoing
performance. Therefore, we have adjusted our results for them to
make our statements more useful and comparable. However, we do not,
and do not recommend that investors solely use adjusted amounts to
assess our financial performance.
|
Millions
|
Q1 2017
Range
|
|
|
|
•
|
Expected net income
attributable to Holdings' shareholders
|
$
|
185
|
|
$
|
285
|
|
•
|
Plus domestic pension
expense(1) and significant items not included in
Adjusted EBITDA(2)
|
50
|
|
60
|
|
•
|
Plus income statement
line items not included in EBITDA consisting of income taxes,
interest expense, interest and investment loss, depreciation and
amortization expense and gain on sales of assets
|
(465)
|
|
(535)
|
|
Adjusted
EBITDA
|
$
|
(230)
|
|
$
|
(190)
|
|
|
|
(1)
|
The annual pension
expense included in our statement of operations related to our
legacy domestic pension plans is comprised of interest cost,
expected return on plan assets and amortization of experience
losses. Gains and losses occur when actual experience differs from
the estimates used to allocate the change in value of pension plans
to expense throughout the year or when assumptions change, as they
may each year. Significant factors that can contribute to the
recognition of actuarial gains and losses include changes in
discount rates used to remeasure pension obligations on an annual
basis or, upon a qualifying remeasurement, differences between
actual and expected returns on plan assets and other changes in
actuarial assumptions. Management believes these actuarial gains
and losses are primarily financing activities that are more
reflective of changes in current conditions in global financial
markets (and in particular interest rates) that are not directly
related to the underlying business and that do not have an
immediate, corresponding impact on the benefits provided to
eligible retirees. This adjustment eliminates the entire pension
expense from the statement of operations to improve
comparability.
|
|
(2)
|
Significant items not
included in Adjusted EBITDA include impairment charges related to
fixed assets, closed store and severance charges and transaction
costs associated with strategic initiatives.
|
Forward-Looking Statements
This press release contains forward-looking statements intended
to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995, including, but
not limited to, statements about our strategic restructuring, our
transformation through our integrated retail strategy, our plans to
redeploy and reconfigure our assets, our plans to market and sell a
portion of our existing real estate assets, our liquidity, our
ability to refinance existing indebtedness, our ability to exercise
financial flexibility as we meet our obligations and pursue
possible strategic transactions, and other statements that describe
the Company's plans. Whenever used, words such as "will," "expect,"
and other terms of similar meaning are intended to identify such
forward-looking statements. Forward-looking statements, including
these, are based on the current beliefs and expectations of our
management and are subject to significant risks, assumptions and
uncertainties, many of which are beyond the Company's control, that
may cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by these forward-looking
statements. Detailed descriptions of other risks relating to Sears
Holdings are discussed in our most recent Annual Report on Form
10-K and other filings with the Securities and Exchange Commission.
While we believe that our forecasts and assumptions are reasonable,
we caution that actual results may differ materially. We intend the
forward-looking statements to speak only as of the time made and do
not undertake to update or revise them as more information becomes
available, except as required by law.
About Sears Holdings Corporation
Sears Holdings Corporation (NASDAQ: SHLD) is a leading
integrated retailer focused on seamlessly connecting the digital
and physical shopping experiences to serve our members - wherever,
whenever and however they want to shop. Sears Holdings is home
to Shop Your Way®, a social shopping platform offering
members rewards for shopping at Sears and Kmart as well as with
other retail partners across categories important to them. The
Company operates through its subsidiaries, including Sears, Roebuck
and Co. and Kmart Corporation, with full-line and specialty retail
stores across the United States.
For more information, visit www.searsholdings.com
NEWS MEDIA CONTACT:
Sears Holdings
Public Relations
(847) 286-8371
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SOURCE Sears Holdings Corporation