Sears Chairman and CEO Edward Lampert announced a new strategic restructuring plan that will save the company $1 billion this year and improve operating performance. The efforts include reducing corporate overhead to integrate operations and improve merchandising, supply chain and inventory management.
The flailing department store chain did make progress toward profitability in the fourth quarter of 2016 and will continue to streamline operations and improve performance in 2017. Just in the first few weeks of the year, the company reached an agreement with creditors to enhance liquidity and financial flexibility.
The company also plans to use the proceeds from the recent sale of its Craftsman brand and recent real estate transactions to reduce outstanding obligations, according to Lampert.
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"We believe the actions outlined today will reduce our overall cash funding requirements and ensure that Sears Holdings becomes a more agile and competitive retailer with a clear path toward profitability," said Lampert. "In addition, we believe these actions will enable us to focus our investments to drive our strategic transformation and the evolution of our Shop Your Way ecosystem through value enhancing partnerships, compelling offerings and a seamless online and in-store shopping experience for our members."
The $1 billion cost savings include the previously announced closure of 108 Kmart and 42 Sears stores.
Other changes under the plan include a greater consolidation of Sears and Kmart corporate and improved accountability online and in stores. Sears will also optimize product assortment using data and analytics to better align with the preferences of Best Members. Finally, the plan will actively manage Sears' real estate portfolio to identify additional opportunities for reduction in capital obligations.
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Lampert added that already in 2017, Sears closed an estimated $72.5 million in real estate and initiated the process of closing 150 additional stores, which should be completed in the first quarter. Plus, the company announced the Craftsman transaction for $775 million in cash.
Overall, comparable store sales fell 10.3% in the fourth quarter, comprised of a decrease of 8% at Kmart and 12.3% at Sears Domestic.