Sears' last gasp

[Brad Johnson]

Sears filed for Chapter 11.

https://www.foxbusiness.com/markets/sears-files-for-chapter-11-bankruptcy-protection

We've discussed the decline of Sears before.

http://www.armedpolitesociety.com/index.php?topic=46093.0

http://www.armedpolitesociety.com/index.php?topic=57837.0

Looks like it may finally come to pass. Sure, it's ostensibly only a "restructuring" but I'm betting the 300 mil loan is to expedite and streamline planning for the final selloff of assets and coordination of store closures. Kinda hard to hang on when you're hemorrhaging that much money, and when you've dumped one of your most famous brands and put a "For Sale" sign on the other.

They finally realized that online was here to stay, but far too late. Until a few years ago their online presence was, at best, vestigial... not to mention painfully slow and hard to navigate. They could have cornered the market with a combo of solid online offerings plus an established brick&mortar presence. They didn't, and they're paying for it with their corporate lives. Walmart realized it in time and is working the hell out of it.

It'll be sad when Sears is gone but I suppose it's the nature of business. Someone else will come along and take their place.

Brad

[Ben]

It'll be sad when Sears is gone but I suppose it's the nature of business. Someone else will come along and take their place.

They should have never bought K-Mart.

Progress, I guess. I sure do fondly remember leafing through their Christmas catalog every year as a kid. Kinda like the kids staring in the department store window in "A Christmas Story". :)

[Brad Johnson]

Sitting here thinking about it, there's something odd about selling off your two most famous brand names when you're supposedly trying to get back on your financial feet.

It just occurred to me that Sears has had some kind of deal with Amazon for a while. Tires, I think. Amazon has, at times, made rumblings about a few brick and mortar locations in certain areas. Now that I'm running all of that through the mental filters it wouldn't surprise me at all to see Sears do another round or two of store closures to pare things back to bare minimum, then have Amazon come in and "miraculously" offer to snap up the remaining locations. The Sears name would live on as "Sears, An Amazon Corporation" or some such to capitalize on the name's recognition with a demographic traditionally not associated with online shopping. The general public would never be the wiser. In fact, Sears stockholders who hung on to their dwindling assets might even see a nice little change in their portfolio status when the Sears stock suddenly became tied to Amazon.

Brad

[Scout26]

They should have never bought K-Mart.

Progress, I guess. I sure do fondly remember leafing through their Christmas catalog every year as a kid. Kinda like the kids staring in the department store window in "A Christmas Story". :)

Actually K-mart bought Sears. 

But yes, Sears' decline began when they got rid of their catalogue operation in 1993.  Now they are getting the snot beat out of them by.....Amazon, Best-Buy*, Wal-mart, and Target, all of which have very robust on-line presence and user friendly buying systems.  Almost like the took the Sears catalogue and moved it on-line (Everything old is new again).  Eddie Lampert ran Sears into the ground by failing to innovate, update, and modernize the retail stores.  Add the failure to develop an on-line presence.  And I won't go into my experience in dealing with Sears Logistics folks after they bought Land's End.  (Let's just say it wasn't pleasant.)

If Eddie wants to know why Sears failed, all he has to do is look in the mirror.  Hedge Fund managers know nothing about running retail operations. 

https://www.investopedia.com/news/downfall-of-sears/

[AJ Dual]

Lampert, the CEO has been running a legal shell game with Sears since his hedge fund bought it out when they were flush with cash from the “Kmart miracle”.  They bought out Kmart the first time it was dying, cut a bunch of fat, the “New Kmart stock” that didn’t have to honor any of the old Kmart shareholders that lost it in the bankruptcy, shot up to $50/share for a bit.

Sears is actually two corporations, and Lampert was the CEO of both. One is the Sears retail operations, the other separate incorporation is the Sears real estate holding company.  That actually can be a good corporate structure. The real estate holding company can hold all the assets and leverage them as collateral for investing, while the retail operation pays rent which comes off their profit/loss figures and cuts their taxes etc. Of course that’s only IF the retail side is successful. So under this arrangement, Sears retail pays rent to the Sears real estate holding co.  Lampert was able to keep on sucking rent money from Sears retail, even as it kept going into debt, and put that money into his hedge fund.

Usually a hedge fund just parts out a business at a profit and moves on. Lampert figured out how to extract money in slow motion over the course of several years.

And even as the Sears locations closed and the retail operations died, those buildings and lots were still on the books of Sears real estate as a huge slew of assets, which his fund could use as collateral to get cheap financial loans at prime rate, then make 10-15% on those loans in the stock market. Easy money.

My personal guess is that all the other things Lampert went around doing with Sears, declaring a “new direction” and capturing customer data and infometrics, the half-hearted late attempt to become an online retail portal like Amazon, and basically going around terrorizing all of Sears retail’s upper management was all for show. I think it was just to create a credible defense that Lampert “was trying” against anyone who wanted to sue him over corporate mismanagement as Sears circled the drain.

[Ben]

Actually K-mart bought Sears. 

Ah, ok. I thought it was the other way around.

[Brad Johnson]

Just saw a news blurb that our local store is among those bankruptcy-request closure list. From what I understand this store was actually one of the more successful, mostly due to Lubbock's geographic isolation and the accompanying half million or so in population which considers Lubbock their retail home city. If our location is getting the ax then I predict the remainder of Sears' retail storefront presence, at least as we have traditionally known it, will be gone within a year.

Brad

[Scout26]

And Lampert snookered Wall Street.  Once he bought K-mart, he convinced Wall Street that all the Kmart stores were sitting really valuable real estate.  Since Wall Street is full of New Yorkers (and folks from CT), they thought "Hey land around is expensive, so land out there must be expensive also."  And that allowed Lampert to borrow like the government.  

He used that money to buy Sears and pulled the same con "The land is worth $$$$$$$$$$$$$."  And he borrowed more.  He bought Land's End.  Stupid move on his part, it was a catalogue operation, and he tried to shove it into Sears stores.  But Preppy clothing didn't fit in with Sears customer demographics.  And he wreck their catalogue operation.  

He also didn't put any money into upgrading or maintaining the retail stores.  They became ill lit (lots of burned out bulbs) grimy, tired looking, buildings and fixtures.   Parking lots were filled with potholes, because they weren't sealcoated or repaved.  They always looked as if they would close at any minute.  

Selling off the major brands (Craftsman, etc.) was death by a thousand cuts.  

Sears has been circling the drain (along with K-mart) for a while.  I'll be sad to see it go.

[HankB]

Sad in a way. I grew up looking at Sears catalogs - including the Christmas Wish Book full of toys! - and remember the gun counter at a Sears in Chicago, "Ted Williams" sporting goods, and the great hot dogs at a hot dog stand tucked under a stairway at the aforementioned Chicago Sears store. No more.  

I saw a story recently that said the current Sears CEO's hedge fund was considering purchase of the Kenmore brand.

Hmmm . . . CEO, charged with running a company for the benefit of shareholders, sees value in part of the company and wants it for his own hedge fund? How is this not a conflict of interest?

With its long history of mail and phone order sales, plus an extensive nationwide distribution and service network, Sears was exceptionally well placed to shift from mail order to internet order . . . but they didn't. I think their leadership saw an opportunity to - legally - line their own pockets instead, and chose to do that rather than make Sears into the Amazon-like internet powerhouse it could have been.

And since they were no doubt careful to dot their i's and cross their t's when they were doing it - they'll get away with it.  

[AJ Dual]

https://youtu.be/gsGphep7YHQ

[Hawkmoon]

I used to buy all my automotive hand and power tools at Sears. I also used to buy all my paint and painting supplies at Sears. My lawn mower and riding mower are Craftsman brand. I have two circular saws, a router and router table, two corded power drills, and a saber saw that are Craftsman brand. My late wife's sewing machine is a Kenmore.

When I walk through the Sears at the mall (to get to the food court or the Verizon Wireless storefront) now, I don't even see a hardware department or the department where we bought the sewing machine. The only reason I go into Sears now is to get from the parking lot to Verizon and the food court.

[MillCreek]

The largest mall in Snohomish County is Alderwood Mall, about 20 miles north of downtown Seattle.  When it opened in the fall of 1979, the largest anchor tenant was Sears, who had the north end of the mall.  That store closed last year and most of the former Sears space is taken up by a new Cheesecake Factory that opened a couple of months ago.  Over the years, I was dismayed to see how the hardware/appliance/paint/yard/sporting goods section shrank to be replaced by clothes, usually expansion of the women's clothing section.  By the time that store closed, it was in sad shape.  And yet the surrounding area is affluent and supports many high end stores at the mall.  I had read in the local paper that the mall management was glad to see it go, since sales/square foot had dropped so dramatically.

[MechAg94]

I think the Best catalog was the one I looked at as a kid.  That and the DAK catalog (electronics).  Sears was all clothing.  

In my memory (grew up in 80's more or less), Sears was always a Shopping Mall store.  That is where I saw their stores.  I grew up in a small town.  WalMart was close by along with other small stores, not Sears.  If we drove in to Houston, Sears was not normally on the list of places to go.  

[BobR]

In my memory (grew up in 80's more or less), Sears was always a Shopping Mall store.  That is where I saw their stores.  I grew up in a small town.  WalMart was close by along with other small stores, not Sears.  If we drove in to Houston, Sears was not normally on the list of places to go.  

The stand alone Sears and the Montgomery Ward stores were the place to go shopping for clothes, tires and a few other things growing up. Hardware was always Otasco (Oklahoma Tire and Supply Company). I do remember thinking seriously about buying a motorcycle at Montgomery Ward back in the late 60's. I always went to Wards or Sears to look at guns.

I was living in San Diego in the mid 70's when the stand alone Sears store close to the house was closed and they moved to the new fangled mall.

bob

[Angel Eyes]

https://www.cnn.com/2018/10/15/business/sears-kmart-real-estate-reits/index.html

Nobody should be surprised by the Sears bankruptcy "unless they own a few Zayre or E.J Korvette locations trapped in a space-time continuum where the Sansabelt clad relax on shag carpeting, illuminated by the warm glow of a lava lamp while they drink Tang and vodka and listen to The Moody Blues," Conforti said.

[K Frame]

"In my memory (grew up in 80's more or less), Sears was always a Shopping Mall store."

Same here, except when I was in college (83-87) there was a Sears outlet store in the crappy strip mall in town (the main Sears for the area was in a thriving mall (apparently still thriving today) where I got a short ton of stuff cheap.

When I got out on my own and moved to the town where my parents grew up, the "Sears" in that town was basically a catalog store where you could order stuff and pick it up after it shipped. The nearest mall Sears was about 30 miles away.

Almost all of my handtools, and quite a few of my power tools, came from Sears -- Craftsman.

I'll miss them if they go, but they've sold off the Craftsman brand (and they're made in China now, so there's really not much draw there for me anymore, especially with Lowes Kobalt line being as good as it is.

[RocketMan]

It was a shame when Monkey Wards closed.  It will be a shame when Sears is gone, too.  But like others have said, they have only themselves to blame.

[Hawkmoon]

I'll miss them if they go, but they've sold off the Craftsman brand (and they're made in China now, so there's really not much draw there for me anymore, especially with Lowes Kobalt line being as good as it is.

And, curiously enough, Lowe's is now selling Craftsman hand tools. I asked a "store associate" at Lowe's how they're going to position the Craftsman toos against their own Kobalt house brand, and he admitted that he had no idea.

[K Frame]

I think what they're likely going to do is try to appeal to the "Pepperidge Farms Remembers" old fart crowd who have used Craftsman since Jesus had his PlaySkool carpenter's set....

And that will eventually lead to the brand's death.

[makattak]

The demise of Sears and Toys "Я" Us is saddening.

Not REALLY saddening, because they are just businesses, but to see businesses that were once a huge part of American life to disappear completely is sad.

I have to wonder how the current retail stores consolidations/closings compares to watching all the car companies fold/get acquired by the "Big 3."

[RoadKingLarry]

The stand alone Sears and the Montgomery Ward stores were the place to go shopping for clothes, tires and a few other things growing up. Hardware was always Otasco (Oklahoma Tire and Supply Company). I do remember thinking seriously about buying a motorcycle at Montgomery Ward back in the late 60's. I always went to Wards or Sears to look at guns.

I was living in San Diego in the mid 70's when the stand alone Sears store close to the house was closed and they moved to the new fangled mall.

bob

My little town had an OTASCO and a Western Auto. The first gun I ever bought myself was from OTASCO, a Marlin 336. The claim is that Walmart killed the little stores like that but I look back and I blame the operators for a big part of the blame. They would be open from 9-5 M-F and close at noon on Saturdays. With the shift in work locations that began in the '70s most people around here worked in other towns and wouldn't get home till after the local businesses had closed. Had they stayed open till 6:00pm they would likely gotten much of the "after work" business.

[Hawkmoon]

The demise of Sears and Toys "Я" Us is saddening.

Not REALLY saddening, because they are just businesses, but to see businesses that were once a huge part of American life to disappear completely is sad.

I have to wonder how the current retail stores consolidations/closings compares to watching all the car companies fold/get acquired by the "Big 3."

Oh, you kids.

Using Sears and Toys "Я" Us together in this context was startling to me. I'm 74 years old. I remember going to Sears stores (As well as Montgomery Ward and Western Auto) when I was a kid, long before I had a driver's license. Toys "Я" Us didn't even exist until 1957 (when I was 13 years old), and I don't think they reached my corner of the U.S. until the mid-1960s. They're just not in the same category.

Weird. I just realized that we went to the Western Auto store so often that I still remember the manager's name: Russ Ravis.