Sears Holdings Corp. (SHLD, Financial) stock jumped as much as 40% on Friday morning before settling at a 28% gain by afternoon trading. The retail giant's stock has fallen 40% in 2017 as the company's sales begin to climb.
Sears, owner of Kmart, enjoyed their biggest trading day since 2014 after 54-year-old CEO Edward Lampert vowed to turn the company around.
Lampert aims to cut the company's debt and annual expense burden by $1 billion. He will work to reduce overhead and meld Sears and Kmart operations closely to cut costs. Lambert will slash pension and debt obligations by $1.5 billion, according to the CEO's statement.
Sears debt grew to over $8 billion in the past five years. Analysts suggest that there's a 50-50 chance that the company will miss debt payments and go bankrupt before the end of the fiscal year. The stock is trading at $7.14 on Friday, far below highs of $191.93 in April 2007. The company's shares have fallen over 96% since reaching those highs.
The company's Q4 report showed a 10% same-store sales decline. The company's net loss in the final quarter of the year may be as high as $635 million. The company plans to shutter 42 Sears stores and 108 Kmart stores as part of its $1 billion savings plan.
The struggling company has sold assets and real estate to help stay afloat. The company announced last month that it will sell Craftsmen to Stanley Black & Decker Inc. (SWK, Financial) in a $900 million deal.
Lampert, the company's CEO, has used his own cash to help finance the company. Lampert is a hedge fund manager and is the company's biggest investor.
The company sold five stores last month for $72.5 million. The sale included two of the company's auto centers. The company further announced that it will market at least $1 billion of its properties. Obligation reductions are the focus of the real estate and asset sales.
The company is trading assets to reduce its massive debt burden.
Sear's credit rating fell again last month, as Moody's Investors Service reduced the company's credit rating into junk territory. Operating losses are to blame for the credit rating decline. The company will focus on the most profitable sale items and will refine its product offerings to boost profit and reduce losses.
Lampert is working to help the retailer improve competitiveness and forge a path of profitability. The company is working to unify its e-commerce and brick-and-mortar operations, too.
Disclosure: Writer of report does not own any shares in the companies mentioned.
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