Sears Holdings Corp., once a retail titan in the U.S., has filed for Chapter 11 bankruptcy.
The company that once dominated American retail files for bankruptcy.
To anticipate de situation, Sears Holding Corp. hired last week a boutique advisory firm to help prepare a supposed bankruptcy filing.
Sears has failed so far to work out a deal with Eddie Lampert, CEO and largest shareholder of the company, to sell more assets and restructure its debts. As these heavy losses compile, the large retailer may not have enough to make the payment on time.
Sears did not immediately respond to requests seeking comment, but it did contact financiers to secure potential financing to operate in bankruptcy.
On Wednesday, October 10, Sears shares dropped 26% to 44 cents in pre-market trading. Shareholders typically lose their entire investment in bankruptcy.
After filing for bankruptcy, Sears plans to close about 142 of its 700 stores by the end of the year, throwing into doubt the future of the century-old retailer that once dominated U.S. malls but has withered in the age of internet shopping.
Sears, a company with over 70,000 employees, has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company’s stock and lent it money, making him its largest shareholder and creditor, according to Reuters
The change to digital, a challenge
Despite several hundred store closures in recent years, Sears Holdings still had 506 Sears locations, including 482 full-line department stores, as well as 360 Kmart stores, according to an Aug. 4 public filing.
Sears struggled to battle digital competitors as it failed to invest in stores and e-commerce.
According to Bloomberg, Eddie Lampert has been using his own money for years to keep Sears afloat. The 125-year-old retailer, based in Hoffman Estates, Illinois, has relied on piecemeal deals and infusions from the hedge fund manager to offset billions of dollars in losses. It has shuttered hundreds of money-losing stores, and it promised to close an additional 150 this year.