Sears Seeks More Refinancing After Big Q4 Sales Dip

Struggling retailer Sears Holdings Corp. (NASDAQ: SHLD) said this morning that same-store sales in the first two months (November and December) of its fiscal fourth quarter were down 16% to 17%. The decline no doubt contributed to the company’s decision to seek new and renegotiated financing.

Sears said it has raised $100 million in new financing and is seeking another $200 million. The company also amended its second-lien notes due in October, raising the borrowing base for inventory purchases and deferring the notes’ collateral coverage test. Sears also is discussing with lenders “improving” the terms on potentially more than $1 billion of non-first lien debt.

The company also said it has identified another $200 million in annualized cost savings “unrelated to store closures.” Sears announced earlier this month that it is closing 103 stores.

Chairman and CEO Edward Lampert said:

The initiatives we have announced today build on those achievements and make clear our determination to remain a viable competitor in the challenging retail environment. The financial transactions we are pursuing and incremental cost actions are designed to accelerate our return to profitability and enable Sears Holdings to increase our investment in the most promising opportunities in our enterprise, including our Shop Your Way network and our Sears Home Services business.

The less-upbeat news is sobering:

However, should the Company’s efforts to complete these transactions not be fully successful, the Board will consider all other options to maximize the value of its assets.

Regarding fourth-quarter results, Sears now expects an adjusted EBITDA loss of between $10 million and $70 million, compared with a $61 million loss in the year-ago quarter. The net loss attributable to shareholders is forecast at between $200 million and $320 million in the fourth quarter, compared with a $607 million loss in the fourth quarter of 2016.

Investors really like what they’ve heard and boosted the share price by more than 10% in premarket trading Wednesday to $3.45. However, shortly after the opening bell, shares traded at $3.18, in a 52-week range of $3.09 to $14.32. The low was posted Tuesday. The 12-month consensus price target on the stock is $3.00.

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