Sears Holdings Corp's shares tumbled as much as 16 percent on Wednesday as bondholders and investors questioned how long the storied retailer could remain in business after it flagged doubts that it could continue as a going concern.
Sears's forewarning comes after more optimistic signs from the company, which has been working on a turnaround under Chief Executive Officer Eddie Lampert.
According to its most recent quarterly earnings, Sears lost more than $2 billion a year ago. In 2012, revenue was $39.9 billion and the loss was $930 million. The 131-year-old department-store chain, which has lost more than $10 billion in recent years, was cited last year by Fitch Ratings as a company carrying a high risk of defaulting. The company has struggled for years with weak sales. Its Sears Domestic segment's operations consist of full-line stores, specialty stores, commercial sales and home services.
ROI deals with the invested cash in the company and the return the investor realize on that money based on the net profit of the business.
They expect tension to mount as Sears approaches the key fourth-quarter selling season amid rising concern about a potential bankruptcy, they said. In January, it announced the latest round of store closings, identifying 150 underperforming locations.
On Tuesday, Sears Canada said it had sealed a credit agreement for a five-year secured term loan of up to $300-million with KKR Capital Markets LLC and GACP Finance Co.
Three other retail locations that Sears Holdings owns in SC also are going dark.
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In recent years, Sears has placed some of its US stores into a real estate investment trust, put some brands up for sale and repeatedly raised debt from its billionaire CEO Mr. Lampert's hedge fund.
"While our historical operating results indicate substantial doubt exists, we want to be very clear that we're taking decisive actions to mitigate that doubt", Howard Riefs, a Sears spokesman, said in an email.
Lampert owned almost 10 percent of the REIT that paid Sears $2.6 billion in 2015 for stores that it purchased, many of which were then leased back to the retailer.
In March, Sears Holdings sold the Craftsman tool brand for $775 million: it had long-term debt of more than $4 billion as of earlier this year.
The company has lost $10.4 billion since 2011, the previous year that it made a profit.
The warning on Tuesday added a new element of uncertainty for a company that has $13.19 billion in liabilities and said it could have difficulty obtaining merchandise from vendors.