Gloom and doom at Sears

Photo: The Canadian Press

Sears, a back-to-school shopping destination for generations of kids, has said that after years of losing money that there is "substantial doubt" it will be able to keep its doors open. But it also insisted that its actions to turn around its business should help reduce that risk.

It was still a dramatic acknowledgment from the chain that owns Sears and Kmart stores, which has long held fast to its stance that a turnaround is possible, even as many of its shoppers have moved on to Wal-Mart, Target or Amazon.

Sears has survived of late mainly with millions in loans funneled through the hedge fund of Chairman and CEO Edward Lampert, but with sales fading it is burning through cash. Sears Holdings Corp. said late Tuesday it lost more than $2 billion last year, and its historical operating results indicated doubt about the future of the company that started in the 1880s as a mail-order catalogue business.

At a largely empty Sears store in St. Paul, Minnesota, where the available parking far outstripped the number of cars in the lot, 85-year-old Jack Walsh and his 82-year-old wife, Mary Ann, said they have shopped at Sears their entire lives, buying items from curtains and window treatments to tires and tools.

"I bought my tools from Sears and I've still got them," Jack Walsh said.

The company known for DieHard batteries and Kenmore appliances has been selling assets, most recently its Craftsman tool brand. But it says pension agreements may prevent the sale of more businesses, potentially leading to a shortfall in funding.

"It's a sad story. This is the place that created the first direct to consumer retail, the first modern department store. It stood like the Colossus over the American retail landscape," said Craig Johnson, president of Customer Growth Partners, a retail consulting firm. "But it's been underinvested and bled dry."

Company shares, which hit an all-time low last month, tumbled more than 13 per cent Wednesday. Sears tried to soothe investors' fears, saying in a post on its site that it remains focused on "executing our transformation plan" and that news reports miss the full disclosure that it's highlighting actions to reduce risks. It also said that the comments made in the filing were in line with "regulatory standards."

Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. He pledged to return Sears to greatness, leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with its loyalty program. The company, which employs 140,000 people, announced in January said it would close 108 additional Kmart and 42 more Sears locations, and unveiled yet another restructuring plan in February aimed at cutting costs and reconfiguring debts to give itself more breathing room.