US retail giant and Kmart parent, Sears Holdings has, today, filed for Chapter 11 bankruptcy protection, as it strives to reorganise the business and become a "more competitive retailer".

The decision was reportedly taken when Sears could not meet a $134million repayment due today.

Chapter 11 protection will buy the company time to reorganise the business and its debts and allowing it to pay creditors over time. Sears said in a statement it plans to use the time to implement “a series of actions to position the Company to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term.”

The department store chain, which sells homewares, furniture, electrical appliances, tools, auto ranges, workwear, and kitchens and bathrooms, has suffered, from increasing competition from online retailers, such as Amazon.  

Sears was once America’s largest retailer and was hailed as the ‘Amazon of its time’, before being overtaken in size by Walmart, which also operates Asda in the UK. However, it and hasn’t posted a profit since 2010 and has sold off many of its brands, including Craftsman tools, as well as a number of valuable properties , as it grapples with debts of around $5.2billion.

It was revealed that Sears CEO Edward S. Lampert has stepped down from his, effective immediately, but will remain chairman of the board. The firm has also formed a restructuring committee made up of independent directors and has appointed turnaround professional Mohsin Y. Meghji as restructuring officer.

In a statement announcing the retailer’s filing for bankruptcy, Mr Lampert said: “Over the last several years, we have worked hard to transform our business and unlock the value of our assets.

"While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.

The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability. Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities.”

“While we have made progress, the plan has yet to deliver the results we have desired.”

Sears also announced it would be closing 142 unprofitable stores by the end of the year, on top of a previously-announced closure of 46 stores by November.

As part of an ongoing plan to downsize the Sears model, the retailer’s store numbers have already fallen to around 820, down from 2,000 five years ago and 4,000 at its peak in 2012. The company currently employs nearly 90,000 people in the US, although that is a reduction on the 246,000 staff in its employment five years ago.

The company explained it would continue trading during the upcoming key holiday season, with Sears and Kmart stores and online and mobile platforms remaining open for business.

Sears merged with big-box home, garden, electronics and clothing retailer, Kmart in 2005, with both Sears and Kmart becoming subsidiaries of the new Sears Holdings Corporation.