Sears Holdings Files for Bankruptcy Protection, Implements Leadership Changes


HOFFMAN ESTATES, Ill.—Sears Holdings Corporation (NASDAQ: SHLD), a one-time icon of the U.S. retail sector, on Monday filed for Chapter 11 bankruptcy protection as part of a “series of actions” the company initiated in its effort to recover its retail footing and “grow profitably for the long term,” according to a statement. Sears, which also is a player in the U.S. optical retail business with leased departments in an estimated 280 stores collectively, via optical partners, has received commitments for $300 million of debtor-in-possession financing and expects many of both of the company’s Sears and Kmart stores to remain opening during the bankruptcy proceedings, according to the announcement.

Sears said it intends to reorganize around a “smaller store platform of EBITDA-positive stores.” (EBITDA is earnings before interest, taxes, depreciation and amortization.) Sears will close 142 unprofitable stores “near the end of the year,” the announcement noted. This is in addition to the previously announced closure of 46 unprofitable stores expected to be completed by November 2018.

In addition, Sears said it expects to “move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term.” The company has 687 stores and about 68,000 employees, according to reports.

"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," Sears chairman Edward S. Lampert said in the announcement. Lampert also relinquished his chief executive officer position with the company as of Monday, as the retailer reported it was establishing “an office of the CEO” to lead the restructuring efforts.

"While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer. 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. 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," Lampert said.

Luxottica Retail’s licensed brands division currently operates 274 Sears Optical departments in the U.S. A Luxottica spokesperson told VMAIL the company “learned of the difficult news regarding Sears Holdings this morning and we are continuing to monitor the situation.”

The spokesperson noted that Luxottica has not yet received confirmation on which Sears Optical locations will be impacted. “As of now, we continue to operate as usual, providing the same exceptional service to our customers. As we learn more about Sears’ restructuring plans, we are committed to keeping our people and our patients informed. For our affiliated doctors and associates at impacted locations, we will do everything possible to identify potential opportunities within the Luxottica family of retail brands,” the spokesperson added.

Refac Optical Group operates a few additional Sears Optical locations, five at the present time. A spokesperson for Refac told VMAIL, “At this point in time, U.S. Vision has a very limited affiliation with Sears. We remain in contact with their corporate offices and are waiting to find out which stores they will keep open. Until then, any further actions we take are based on our independent activities related to the profitability at each location. We are very interested to see the plan Sears puts forward.”

With Lampert stepping down as CEO, the company has created an office of the CEO, which will be responsible for managing day-to-day operations. The office of the CEO will be composed of Robert A. Riecker, chief financial officer; Leena Munjal, chief digital officer, customer experience and integrated retail; and Gregory Ladley, president of apparel and footwear.

The board also formed a special committee (the "Restructuring Committee") that will oversee the restructuring process and have decision making authority with respect to transactions involving affiliated parties. Mohsin Y. Meghji, managing partner of M-III Partners, has been appointed chief restructuring officer. Meghji is a nationally recognized U.S. turnaround professional with a track record of revitalizing companies experiencing financial, operational or strategic transitions to maximize value for stakeholders.

The company's Sears and Kmart stores, and its online and mobile platforms, are open and continue to offer a full range of products and services to members and customers. Holdings' services and brand businesses will also continue to operate as usual.