END OF AN ERA
Sears in El Centro among stores listed for closure by end of 2018
EL CENTRO — After 13 years of business, the Sears located at Imperial Valley Mall, 3751 S. Dogwood Ave., is closing its doors permanently.
Employees were left reeling after Sears Holdings announced the decision Monday morning. Sears Holdings operates both Sears and Kmart.
Bob Diaz, who has worked for the El Centro Sears for the past 23 years, told Imperial Valley Press on Monday the announcement was tough to deal with.
“Absolutely,” he said. “Not just for me, but for the community.”
The total number of employees currently working at the El Centro Sears was unknown Monday. Sears Holdings public relations representatives did not respond to multiple requests for comment from IVP before press time Monday.
The Sears in El Centro, as well as the Sears in Yuma, Ariz., are among 142 “unprofitable” stores that will be closed by the end of 2018, according to a press release issued Monday by Sears Holdings. Liquidation sales at these stores are expected to begin in the near future. This is in addition to the previously announced closure of 46 unprofitable stores that is expected to be completed by November.
At its peak, the operator of Sears and Kmart had 4,000 stores in 2012 but will now be left with a little more than 500, according to the Associated Press. Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred huge losses over the years.
Mitigating jobs losses
Learning of the announced closure Monday afternoon, Imperial County Board of Supervisors Chairman Raymond R. Castillo, District 5, said the county would consider options to help current Sears employees find new jobs. The Sears in El Centro is located within District 5.
“I am sure we will get our Workforce Development Office to assist with the closure and assist some of those folks with either job placement or even applying for unemployment benefits,” Castillo said.
And, the county will also reach out to the Imperial Valley Economic Development Corp. to explore the possibility of attracting a new big box store to the soon to be vacated property currently occupied by Sears, Castillo said.
“In my mind, it would behoove the corporation to work with a new retail store to occupy that space because it is a big space. Overall, I would hope that maybe at some point in the future we might see it open again.”
But for now, the economic loss to the community is a stinging blow, Castillo said.
“It is really unfortunate to see the place close down because it is a pretty large complex. It is a big loss to the community and I would imagine to the city of El Centro as well. [Sears] generates a lot of sales taxes and so that is another loss.” Overall, Castillo was surprised that the El Centro Sears was selected for closure.
“Think about it, this is the only Sears store for the whole region and I am surprised that they are closing it down,” he said.
“It is a relatively news store, if you think about it. I broke ground as a mayor of the mall back in 2004 when I was in City Council and the store was opened in 2005.”
Castillo hopes Sears Holdings reconsiders its decision.
“My best hope would be that maybe they would renegotiate this and reconsider the closure of the store. We will speak with … the corporation that owns this mall down here and see what they have to say about it.”
The mall is operated by CBL & Associates Properties of Chattanooga, Tenn. Company officials could not be reached for comment before press time Monday.
Amazon of its day
For generations of Americans, the brick-like Sears, Roebuck and Co. catalog was a fixture in just about every house — a miscellany of toys and clothes and furnishings and hardware that induced longing for this or that dream purchase. The Sears brand loomed as large over the corporate landscape as its 108-story basalt-like headquarters did over the Chicago skyline.
“It was the Amazon of its day,” said Mark Cohen, a professor of retailing at Columbia University and a former Sears executive.
The company began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s. But the onset of discounters such as Walmart created challenges for Sears that have only grown. Sears faced even more competition from online sellers and appliance retailers such as Lowe’s and Home Depot.
Chapter 11 filed
Sears Holdings on Monday announced it had filed for Chapter 11 bankruptcy protection in federal court.
Chapter 11 is filed when a business is unable to service its debts or pay creditors and allows the company to reorganize in the hope it will become profitable. In this case, reorganization includes the shuttering of the 142 unprofitable stores announced this year for closure.
Sears Holdings will retain control of its about 500 remaining storefronts as a debtor in possession and is subject to the oversight and jurisdiction of the federal court.
The question now is whether a smaller version of the company that once towered over the American retail landscape can be viable.
“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “Hopefully, a smaller new Sears will be healthier.”
Others don’t share Johnson’s optimism.
“That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure,” said Neil Saunders, managing director of GlobalData Retail, in a note published Monday. “In our view, too much rot has set in at Sears to make it [a] viable business.”
Even President Donald Trump weighed in on Sears’ collapse, calling it “a shame.”
“Sears, Roebuck, when I was growing up, was the big deal,” Trump said Monday outside the White House. “And, it’s very sad what happened, very, very sad.”
But Trump added that many of the Sears’ sites will be put to “good use” by successor companies, which may create new jobs.
The company has struggled with outdated stores and complaints about customer service even for its once crown jewels: major appliances like washers and dryers. That’s in contrast with chains such as Walmart, Target, Best Buy and Macy’s, which have been enjoying stronger sales as they benefit from a robust economy and efforts to make the shopping experience more inviting by investing heavily in remodeling and de-cluttering their stores.
Edward S. Lampert, Sear’s largest shareholder, has stepped down as CEO but will remain chairman of the board. A new Office of the CEO will be responsible for managing day-to-day operations.
The company said Monday it has secured $300 million in financing from banks to keep the operations going through bankruptcy. It’s negotiating an additional $300 million loan from ESL Investments, a hedge fund managed by Lampert.
The filing listed between $1 billion and $10 billion in assets with liabilities ranging between $10 billion to $50 billion. It listed the Pension Benefit Guarantee Corp., the federal agency that insures pensions, as Sears’ biggest unsecured creditor, but noted the amount it owed as “unknown,” according to court documents.
Ripple effects
Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing mall landlords to its tens of thousands of workers. But unlike other retailers that have gone bankrupt, there are not a lot of spoils for rivals to pick up.
The company, once a big seller of toys, now has a tiny 2 percent market share in that area, according to investment research firm Jefferies. And its market share in major appliances has shrunk to just under 10 percent from 41 percent in 2001, according to Johnson of Customer Growth Partners.
Lampert has been loaning out his own money for years and has put together deals to prop up the company, which in turn has benefited his own ESL hedge fund.
Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., following earlier moves to spin off pieces of its Sears Hometown and Outlet division and Land’s End.
In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets, like Kenmore, through his hedge fund as a $134 million debt repayment came due on Monday. Lampert personally owns 31 percent of the company’s shares, while his hedge fund has an 18.5 percent stake, according to FactSet. Sears’ stock has fallen from about $6 over the past year to below the minimum $1 level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around $141.
The company, which once had 350,000 workers, has shrunk to 68,000 workers as of Monday’s court filing. It had fewer than 900 stores as of May.
In a March 2017 government filing, Sears said there was “substantial doubt” it would be able to keep its doors open — but insisted its turnaround efforts would mitigate that risk.
Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with a loyalty program. But losses continued, and the company struggled to get more people through the doors or to shop online.
Sales at the company’s established locations tumbled nearly 4 percent during its fiscal second quarter.
Still, that was an improvement from the same period a year ago. Total revenue dropped 30 percent in the most recent quarter, hurt by continued store closings.
“The problem in Sears’ case is that it is a poor retailer,” GlobalData Retail’s Saunders wrote in an analyst note last week. “Put bluntly, it has failed on every facet of retailing from assortment to service to merchandise to basic shop-keeping standards. Under benign conditions, this would be problematic enough, but in today’s hyper-competitive retail environment it is a recipe for failure on a grand scale.”