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Sears up for sale? Not this year at least

Company officials say transformation moving head, no plans to liquidate

Executives at Hoffman Estates-based Sears Holdings Corp. admit the long-standing effort to transform into a company both consumers and Wall Street would love hasn't been easy.

It hasn't been fast, either.

After nine quarters of losses, about 20,000 fewer employees, 95 store closings, and vendors reportedly worried about getting paid, what's next for the aging retailer?

Sears says it's keeping its focus on becoming profitable with improved store, online and mobile shopping, ranging from curbside pickup and quick shipping to in-store delivery and personalized offerings and deals.

"We have a vision for what Sears Holdings can become and are willing to take the risk, maintain the focus and sustain the long-term commitment to try to bring it to life," Sears spokesman Howard Riefs said. "We never thought it would be easy."

The parent of Sears and Kmart retail stores also has a plan to please Wall Street, which has included securing a $400 million loan through Chairman Edward Lampert's ESL Investments financial firm and a $380 million cash influx from selling most of its interest in Sears Canada.

Its workforce also has been reduced. The company had 226,000 employees nationwide as of Feb. 1, compared to 246,000 workers a year ago. This includes about 5,500 employees at the headquarters in Hoffman Estates.

Yet, through all this, the company denies having any trouble getting merchandise, isn't aiming for bankruptcy court and has no immediate plan to be sold off entirely.

Hoffman Estates Mayor William McLeod said he has been talking recently with Sears executives, and he's reassured that the company will remain open and in the town.

"They have a plan they're working on, and they will be around for a long time," McLeod said. "Their long-term viability is important to the village. I think their plan will happen."

The legacy retailer said it plans to roll out more initiatives in coming months and is poised to transform into a better company for both customers and Wall Street.

Some analysts remain skeptical. They see Sears continuing to trim itself, closing underperforming stores and trying to sell or lease its real estate in prime locations.

"They are not at financial collapse, but, at this point, it will have to have more store closings and work harder to get credit and supplies," said George Rosenbaum, co-founder of Shapiro (formerly known as Leo J. Shapiro & Associates LLC), an opinion and research firm in Chicago. "If they sell anything now, it will be selected properties, not the whole company. The whole company won't be for sale in the next 12 months, but eventually it will occur."

If Sears continues to burn through even the new cash infusion, then suitors could line up, including equity firms, Rosenbaum said.

"What retailer might want to buy Sears?" Rosenbaum said.

"It might be a big, independent store, or they'll just break up the sites for other uses. I cannot imagine any major retailer wanting to buy Sears as a whole."

Sears is banking on what it calls Shop Your Way and Integrated Retail.

The first is a member-loyalty program that lets shoppers earn points to be redeemed for deals. It runs in lockstep with Integrated Retail, a phrase Sears uses for closely linking its in-store, online and mobile shopping options.

While Sears promises to boost its programs and specials for consumers, it still must fight the perception that it's where everyone's grandparents shopped, said David Aron, an associate professor of marketing at the Dominican University Brennan School of Business in River Forest.

"Sears is a victim of the disappearance of the middle," Aron said. "No amount of Kardashians (Kollection, line of clothing) can make them upscale and the discount market is held too firmly by the Walmarts and Targets. Sears does seem to be targeting the Hispanic market and may have to continue relying on specific markets and the power of their brands, like Kenmore and Craftsman, to stay alive."

While Sears has gotten a major boost from Lampert, consumers and vendors remain concerned, Aron said.

"It's no wonder vendors and other stakeholders are getting nervous," Aron said. "It's like Lampert keeps reaching into his pocket to replace the money that should be in the cash register but isn't. Meanwhile, they're divesting so much, to the point where Sears will eventually have less to offer than ever before."

Despite reports that vendors were worried, "we have never paid anyone late, ever," said another Sears spokesman, Chris Brathwaite. " ... We value our relationship with our suppliers and vendors and the flow of goods will continue to this company."

Earlier this year, the company said it planned to raise about $1 billion in 2014. Through the first half of the year, it raised $665 million, including $500 million from spinning off Lands' End in April and $165 million in proceeds from real estate, plus the $380 million from Sears Canada.

Sears is sending mixed signals to consumers and Wall Street, said market strategist and adviser Phyllis Ezop, president of LaGrange Park-based Ezop and Associates.

"They are repeatedly selling off prized assets, which can suggest they are slowly whittling away the company just to raise cash," Ezop said. "On the other hand, they are apparently taking steps toward a major transformation, and say that they are further ahead of other retailers in addressing the increasing consumer preference for doing more online."

Ezop said the company faces a major challenge because it is opting for a very expensive way to attempt to integrate the new with the old.

"Recognizing and acting on the increasing importance of technology can be a plus," she said.

"But, it often works much better when it is done in a way that integrates the new and the old based on company strengths. Major transformations, if even doable, can easily require seemingly endless financing."

Despite the plans, the bottom line continues to bleed. Will the company head to bankruptcy court?

"Regarding reports of possibly filing bankruptcy, we don't comment on rumors and speculation," Riefs said. "We have substantial assets with which to fund our transformation."

Despite the influx of cash, Lampert is a "victim of hubris," Rosenbaum said.

"He may not want to give in," Rosenbaum said. "It would be a huge defeat for him."

Sears needs 10 times the cash Lampert lends

Sears to raise cash through Canadian ops sale

Sears defends self against report of vendor issue

Sears to lease retail space to U.K.'S Primark

In this 2011 photo, the setting sun is reflected on a window with the Sears logo in Springfield, Ill. Associated Press File photo
  Shoppers stop at Sears at Woodfield Mall in Schaumburg. Despite nine quarters of losses, Sears Holdings officials say they're confident in their plan to please both shoppers and Wall Street. George LeClaire/gleclaire@dailyherald.com
Sears has about 5,500 employees at its headquarters in Hoffman Estates. Village officials say they've been reassured the company will be in town for the long haul. DAILY HERALD FILE PHOTO
  The Sears store at Woodfield Mall in Schaumburg. George LeClaire/gleclaire@dailyherald.com
  The Sears store at Woodfield Mall in Schaumburg. George LeClaire/gleclaire@dailyherald.com
  Sears has about 5,500 employees at its headquarters in Hoffman Estates. Village officials say they've been reassured the company will be in town for the long haul. Mark Welsh/mwelsh@dailyherald.com

Sears Holdings

•Headquarters: Hoffman Estates

•Business: Parent company to Sears and Kmart

•Leadership: Chairman and CEO Edward S. Lampert

•Earnings/losses: lost $573 million in the second quarter, lost $975 million during the first half of this year.

•Revenues: $8.01 billion in second quarter, compared to $8.87 billion in the same period a year earlier.

•Stores: Closed about 95 stores so far this year, out of about 130 it previously said it would close. It will be left with about 1,900 Sears and Kmart stores.

•Employees: 226,000 as of Feb. 1, compared to 246,000 a year ago.

Source: Sears Holdings

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