Sears CEO Eddie Lampert has poured another $4 million of his own money into the struggling department store chain, seemingly showing faith in his strategy to turn around its fortunes in time to avoid bankruptcy.
Just days after the company acknowledged there was “substantial doubt” that it would remain a going concern, it indicated that Lampert had bought more than 500,000 Sears shares over the course of three days last week. News of the purchases sent the stock up 11% yesterday.
Once the country’s biggest department store chain, Sears’ challenges represent a clear demonstration of the headaches that digital disruption is causing CEOs in the retail sector. Many brick-and-motor stores are suffering as more consumers purchase goods online, large incumbents such as Wal-Mart invest millions improving in-store experiences and newcomers such as Amazon expand their product offerings and slash delivery times. Intense competition and years of volatile consumer confidence has forced many outlets to offer deep discounts to attract business.
In February, Lampert, who owns roughly half of the company’s stock, outlined a turnaround plan that involves trimming debt by closing hundreds of stores. He’s also trying to harness data analytics technology to improve product selection and recently introduced a rewards program called Shop Your Way, intended to bring more customers to the company’s e-commerce offering.
Whether his efforts will work remains to be seen: credit default swap traders are pricing in a 50-50 chance that the company will go bankrupt before year-end, according to a Bloomberg report last month.
In a blog post last week, CFO Jason Hollar said the company’s warning on its financial position was in line with regulatory standards that require management to assess and disclose all potential risks. “Despite the risks outlined we remain confident in our financial position and remain focused on executing our transformation plan,” he wrote.
Interestingly, Lampert may not have as much to lose as other Sears shareholders in the event of a collapse. As a significant creditor to the company, he would gain ownership of much of its real estate sites held as loan collateral. He also owns a substantial stake in some of its best properties through his interest in an associated real estate investment trust.
“I firmly believe we will succeed in becoming a new kind of retailer as we provide real value to members with value offerings, personalized services and easy access to the brands, convenience and value they want, whenever and wherever they want,” Lampert said in a letter to investors early this month.
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