Questions 1-4

Case 14-2 Figures Do Not Lie but Liars Figure: The "Searing Iruail If you are looking for Sears, do not look for their catalogs. In the world of retail, Sears Holdings is an appliance plagued Sears Holdings for the past several years as giant. In addition to home appliances, the company is a leading retailer of tools, as well as lawn and garden, fitness, and automotive repair equipment. With 1,672 retail the popularity of ecommerce and fierce competition stores across the United States, Sears Holdings operates from other big box retailers has been growing. In fisthrough subsidiaries Sears, Roebuck and Co. and Kmart, cal 2016, Sears Holdings' net revenues decreased by offering proprietary Sears brands including Kenmore, Craftsman, and DieHard. Beyond retail, Sears Holdings 19% due to a drop in revenues from all segments (and is the largest provider of home installation and proda drop of $2.1 billion associated with Sears Canada. uct repair services in the United States. In 2014, Sears which was de-consolidated in October 2014). Holdings spun off Lands' End and reduced its once Kmart's revenues declined due to having fewer stores in majority stake in Sears Canada to just 12% as it sought operation, which accounted for approximately \$1.1 bitto raise cash to overcome struggling store sales, In 2017. lion of the decline and a drop in comparable store sales the company agreed to sell its Craftsman tool brand to driven by declines in the consumer electronics, apparel. Stanley Black \& Decker for $900 million. (1) grocery and household and drugstore categories. The revenues from Sears Domestic segment decreased due to a drop in comparable store sales of 11.1%, which accounted for $1.2 billion of the decline, and the effect of having fewer full-line stores in operation, which ble. Declining store sales and mounting losses have accounted for $433 million of the decline. The company's net loss decreased by 33% in fiscal 2016 , mainly due to to decroves in povwdil abd achertining exerwes and the absence of expenoss of 5013 millicm frum Sours Camula and 577 million from the Lasids Eind beairios (2) Sows has been losing money while ckning stores and welling assets in order to stay solvent for quite as while. The company. has injected almost 512 billion in liquidity from 2012 to 2016 to fund ongoing operations given material declines in inter nally generated cash flow; the compary/s"cast burn" was $1.6 bilion in 2016 and projected to hit $1.8 billion in 2017 .(3) The firm is having increasing difficulty in paying its bills. CEO Eddie Lampert has reacted to the firm's negative perfor mance by developing a strategic plan including "a restruc: turing program designed to streamline operations, improve operating performance, and deliver cost reductions of at least $1 billion on an annualized basis. Some of these savings are new; while others come from an already underway plan to close 108Kmart and 42 Sears's stores. Lampert also promised to further lower costs or generate cash by leveraging the company's real estate through potential in-store partnerships, subdivisions, and reformatting to support digital sales. In addition, the CEO reiterated plans to evaluate strategic options for the Kenmore and Diellard brands as well as the Sears Home Services and Sears Auto Centers businesses, this could mean a sale, partnership, or joint. venture for any of the properties.(4) Sears can survive for a while by selling off assets, but that doesn't increase sales.... In order for Sears to have a long-term future, it needs to return to profitabilityThat's something its CEO cites as a goal, but aside from cutting its cash loss in Q4, there have been few signs that Lampert's vision for a company with fewer physical stores and a robust online presence (through its Shop YourWay app) will work. The chain saw comparablestore sales decline by 10.3% in Q4-a terrible sign for a company that has been working on a turnaround for years. (5) On February 7,2017, the stock fell 13%. Why? A sudden surge in the cost of insuring Sears's bonds was rooted in the same frustration that stockholders had been suffering for years, it seems to be a simple matter of the company not selling enough of the right merchandise at the right price in the right way at the right time. If bond and stockholders are to be believed, the end is near for Sears.(6) 1. Most of the financial information described in the case can be found using which financial control tools? Explain in detail all financial control tools. I 2. Describe and explain with details what factors in the external environment of Sears might have negatively affected its performance? Search the internet for a news outlet that has exposed one of the factors, explain the news and how it relates to Sears and the external factor. 3. What does the statement "a simple matter of the company not selling enough of the right merchandise at the right price in the right way at the right time" imply from a planning perspective? 4. CEO Eddie Lampert's development of a strategic plan to counter Sears's decline would be an example of what class of leadership theory