Some have said it’s been coming for years. Others say they saw the writing on the wall when iconic brands like Craftsman and Kenmore went up for sale. But now it’s — almost — official … officials with Sears have told investors the future of the company is in dire risk. Even after closing multiple locations, they can’t promise the company will continue to operate at all.
Though the company’s report did offer some silver lining, as reported by CNN, “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern…”
But this blunt assessment was somewhat deflected by CFO Jason Hollar, “It is very important to reiterate that Sears Holdings remains focused on executing our transformation plan… This is evident in the decisive actions we have taken in recent months. Despite the risks outlined we remain confident in our financial position.”
That’s an interesting deviation of message right there. So, which is it? Is Sears headed for a crash landing, or is the company in ‘sound financial position’? Well, in some ways of thinking, it could be both. There’s no doubt that American retail, and big department stores, in particular, are in dire straits.
An honest look at the numbers — most of them red for years — Sears is struggling just to find enough ready cash to make it through. According to CNN, Sears Holding was about $3 billion in debt last year. Now they’re at $4.2 in debt and coming off a $2.2 billion loss. The company has not turned a profit since 2010, and the state of the marketplace doesn’t hold out much hope.
This is on top of limited ability to turn its current assets into cash. The company could try to get some money out of property, but they still have to fund pension plans. And there’s less and less available to liquidate or lease. Back in 2006, just after purchasing Kmart, Sears had 3,400 stores. It’s now down to 1,400. That loss of 2,000 stores came with a workforce reduction of more than 200,000. A sad reality for a company that was once the largest retailer in the United States.
It’s also a cautionary tale of what goes around comes around. Sears was once the big name on the block, and when it came to town, mom and pop retailers tended to start counting the days. This was the trend for decades until Walmart found a better way to do what Sears had invented, and then Amazon found a better way still. Now the brand that helped define suburban American life in the post-WWII era is now losing out to a company that invented an even easier way for people to get exactly what they want.
There may be some light at the end of the tunnel for Sears, but it doesn’t look like even they believe it.
Ronn Torossian is a PR maverick and the CEO of 5W PR in NYC.