Sears Holdings Corp. (NASDAQ: SHLD), owner of Kmart and Sears, has become famous for a relentless string of store closings. There is some evidence the company is not shrinking entirely. Like some other retailers, it has adopted the tactic of exploring whether niche locations will thrive.
The most recent example of the retreat of Sears happened Friday. Company management said it would close eight more Sears locations and 35 Kmart locations. At roughly the same time, the company bought itself some time via a new financial line of credit.
Sears Holdings Corporation (SHLD) today announced that it has entered into an amendment to its existing Second Lien Credit Facility dated September 1, 2016. The amended credit facility provides an uncommitted line of credit facility (the “Line of Credit Facility”) under which subsidiaries of the Company may from time to time borrow line of credit loans (“Line of Credit Loans”), subject to applicable borrowing base limitations, in an aggregate principal amount not to exceed $500 million at any time outstanding. Individual Line of Credit Loans under the Line of Credit Facility are expected to have maturities of up to 179 days and will be on pricing and other terms to be agreed with the lenders that are or become party to the Second Lien Credit Facility. Mr. Edward S. Lampert, the Company’s Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc. (“ESL”), which controls the Agent under the Line of Credit Facility. ESL has indicated that it is considering participating in the Line of Credit Facility as a lender, but ESL is under no obligation to do so. The Company intends to discuss additional Line of Credit Facility advances with additional lenders from time to time.
Lampert, who created Sears Holdings in 2005 and is its largest shareholder and CEO, has once again underwritten a financial instrument to keep the company on life support. He has become known as the individual who presided over the most brutal retail company collapse in history.
The effort to move into the niche store business is probably too little, too late. The company hopes to play to its strength in mattress and appliance sales. It announced last month:
Sears announced the grand opening of its first Sears Appliances & Mattresses store today. Located in Pharr, Texas, the latest innovative retail concept from Sears is a free-standing store dedicated to two of its strongest categories, while offering the power and capability of its leading integrated retail services. The new store builds on the success of the Sears Appliances store that opened in Ft. Collins, Colo. in 2016 – a location that has surpassed projections since its opening.
The stores will rely on Kenmore appliances and mattresses from major producers with famous brand names. The stores, the company claims, also will offer improved customer service.
Sears cannot open niche stores as fast as it closes large ones. The strategy might have worked if the company had started years earlier. Now, however, it is just a poor smokescreen that cannot hide the demise of Sears Holdings.