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Sears Stock Soars on New Survival Plan

Sears is nothing if not steadfast, and its latest effort has sent stocks up as high as 40 percent.

In a statement Friday, Sears Holdings outlined a restructuring plan to streamline operations and save the company at least $1 billion in costs.

The news sent the company’s shares up 40 percent in pre-market trading. As of publication time, shares of Sears stock—which has lost as much as 60 percent of its value over the last year—was trading up 30 percent to $7.21.

This follows Sears’ announcement just last week that it entered into another sale-lease back deal with a Tennessee-based real estate investment trust, which it also said would bring in $1 billion. At the time, that news sent Sears’ shares down as much as 30 percent in the immediate aftermath.

Traders, however, seem to have hope for the 131-year-old retailer yet.

Announcing its preliminary fourth quarter results in the same statement, Sears said it made progress toward profitability, though comparable sales declined 10.3%. The retailer expects its net loss to be between $635 million and $535 million, compared to a net loss of $580 million in the fourth quarter of 2015.

Chairman and CEO Edward Lampert said so far this year, Sears has taken several steps to “unlock value” across its assets, reached an agreement to amend its asset-based credit facility for greater liquidity and sold its Craftsman brand to drum up funds.

“To build on our positive momentum, today we are initiating a fundamental restructuring of our operations that targets at least $1 billion in cost savings on annualized basis, as well as improves our operating performance,” Lampert said. “To capture these savings, we plan to reduce our corporate overhead, more closely integrate our Sears and Kmart operations and improve our merchandising, supply chain and inventory management.”

As part of the restructuring plan, Sears Holdings will further consolidate Sears and Kmart corporate and support functions and improve accountability for profitability at stores and online. The retailer will also implement an integrated model to drive efficiencies in pricing, sourcing, supply chain and inventory management. Product assortments at Sears and Kmart will see changes based on data analytics to better align with shoppers’ demands, and Sears will continue looking to its real estate portfolio for additional opportunities.

“We believe the actions outlined today will reduce our overall cash funding requirements and ensure that Sears Holdings becomes a more agile and competitive retailer with a clear path toward profitability,” Lampert said.

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In other news related to Sears and its CEO, Lampert has agreed to spend $40 million to settle a lawsuit that alleged he used the company’s real estate assets to enrich himself. Seritage Growth Properties, a real-estate investment trust Lampert created in 2015 to orchestrate deals like Sears’ sales and lease-backs to drum up cash to help the ailing retailer’s financial situation, was the focus of the suit. Lampert’s hedge fund, ESL Investments, owns upward of 43 percent of Seritage and 54 percent of Sears Holdings. The lawsuit claimed Lampert used his position to advance his own interests over the company’s. Sears said it settled the lawsuit to avoid dragging out litigation but did not admit the claims were valid.