Sears hit with $623 million charge due to store closures
The charges relate to markdowns, severance costs and lease termination costs related to the business’ Chapter 11 bankruptcy, filed due to its inability to hit a debt payment deadline in October.
The company said some of the charges, revealed in a regulatory filing, have already been incurred, with the remaining charges to be booked in the fourth quarter.
At the time, Sears chairman Edward Lampert told investors that while the business had made progress, its plan had not delivered the desired results.
“Addressing the Company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer,” Lampert said.
GlobalData Retail managing director Neil Saunders noted there was no clear path to success for the retailer.
“The group has tried to shrink its way to profitability for years to no avail, so it is hard to see why pursuing the same strategy under the auspice of Chapter 11 would result in a different outcome,” Saunders said.
Saunders said that several reasons have contributed to this outcome, but foremost among them is Sears management’s failure to evolve the store offering as retail modernised.
“Ultimately, Sears needs not just to fix its financial problems. It also needs to repair the deficiencies in terms of retail strategy… only a complete change of management will bring this about.”
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