Sears stock soars as ailing retailer maps out survival strategy
Ailing retailer Sears Holdings (SHLD) mapped out a plan to shed debt, consolidate corporate operations, overhaul its product selection process and consider options for its real estate in its ongoing bid to survive.
The plan unveiled Friday thrilled investors, who drove Sears shares up 30% to $7.22 in afternoon trading.
The latest restructuring plan does not include new closures of Sears or Kmart stores after the company recently announced plans to shutter 150 of its more than 1,300 locations.
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Is your local Sears or Kmart among 150 stores to be axed? See the list
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The company estimated that its new measures would lower its debt and pension obligations by $1.5 billion and reduce annual costs by $1 billion.
The debt reduction includes a contribution from the recent sale of the company's Craftsman brand, which was worth about $900 million, while the cost reduction includes savings from the store closures.
To be sure, the company's sales performance remains dismal. Sales at stores open at least a year fell 10.3% in the fourth quarter, including an 8% reduction at Kmart and 12.5% at Sears.
And the company estimate that its fourth-quarter net loss would range from $535 million to $635 million, including a non-cash writedown of the value of the Sears brand name totaling $350 million to $450 million.
"I'm kind of surprised that they're getting a whole lot of love from investors because it's the type of pronouncement that we've heard several times before," said Greg Portell, lead partner in the retail practice of strategy and management consultancy A.T. Kearney. "They have to address, why go to Sears?"
But the retailer's plan to "simplify" its corporate structure, "optimize produce assortment" and "drive efficiencies in pricing, sourcing, supply chain and inventory management" inspired confidence in investors.
"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," Sears CEO and investor Edward Lampert said in a statement.
The future of Sears real estate is among the key questions. The company hinted that it would consider sales of more stores, saying it would "capitalize on valuable real estate" through in-store partnerships while it continues to "actively manage" its store portfolio "to identify additional opportunities for reconfiguration and reduction of capital obligations."
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.