Sears Files for Bankruptcy Amidst Plummeting Sales and Huge Debt

On Monday, Sears filled Chapter 11 bankruptcy as massive debt and huge losses became too much.

The big question is if the smaller version of the business, that at one time dominated the retail landscape of the U.S. can remain a viable entity or if the iconic brand is going to be forced out of operating.

Sears, which began in the 1880s as a mail order catalog, has been slowly heading toward extinction due to lagging behind others in the industry and incurring huge losses the last few years.

The company has been struggling with stores that have become outdated and complaints over customer service.

That is in big contrast with huge retail chains such as Best Buy, Macy’s, Target and Walmart, which have enjoyed strong sales thanks to a robust U.S. economy and efforts to make their shopping experience more enticing through investing in remodeling and cutting down the clutter in their stores.

Sears Holdings, which has under its umbrella both Sears locations and Kmart stores, will shut 142 of its unprofitable locations near the end of 2018, using liquidations sales that will soon begin.

That is in addition to 46 other store closures that already were announced. Edward Lampert stepped down as the CEO and will stay on as the chairman of the board.

A new CEO will operate the day to day operations of the enterprise.

Sears has joined a growing list of different retailers that have gone the route of filing bankruptcy or have liquidated the last couple of years amidst a highly competitive retail climate. Some such as Payless successfully emerged out of reorganizations from bankruptcy court.

However, several others such as Bon-Ton Stores and Toys R Us have not. Both retailers had to close their operations in 2018 soon after filing Chapter 11.

Given the sheer size of Sears’ filing there will be a big ripple effect on things from already hurting landlords to thousands of workers.

The largest shareholder, Lampert, has loaned his money for several years and put deals together to prop the retailer up, which in turned benefited his ESL hedge fund.

In 2017, Sears sold Stanley Black & Decker its famous Craftsman brand following a move earlier to spin off parts of its other divisions such  as Land’s End, Sears Hometown, and Outlet.

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