Shares plunged by more than 30% on Wednesday, following a report that the US retail chain was preparing to file for Chapter 11 bankruptcy protection.
The firm was preparing the filing ahead of the deadline on Monday for a $134m (£101m) debt payment, the Wall Street Journal reported. Sears, which also owns Kmart, did not comment on the report, but was reported to be still looking at alternatives.
The company, which was once America’s biggest retailer, has been rapidly closing stores and selling properties and other assets as it tries to staunch the losses. It has struggled to compete against giants such as Amazon and Walmart and is grappling with a debt load of more than $5bn. The retailer has posted seven straight years of losses and its sales have not grown since the 2008 financial crisis.
In recent weeks, businessman Eddie Lampert – who serves as the company’s chief executive, biggest investor, landlord and significant creditor – published a proposal to restructure the firm’s debt that would avoid bankruptcy. Critics have said the latest plan would give preference to debt owed to his own companies, which hold about $1.8bn in Sears’ debt. In the past, his funds have extended credit in the face of debt deadlines, allowing Sears to avoid bankruptcy.
In addition to Monday’s deadline, the firm is facing more than $600m in debt that is due to mature over the next year.
Critics have said the company’s problems were exacerbated by low investment in the firm’s stores, which left Sears especially vulnerable to trends driving shoppers out of stores towards online. They have also criticised the company’s decision to spend money on buying its own shares – a move that typically rewards investors by boosting the share price.
Sears Canada, which was spun-off from the main company in 2012, filed for bankruptcy last year, with the loss of thousands of jobs.