Sears seeks Chapter 11 protection
Bankruptcy filing expected to have ripple effect, analysts say
NEW YORK — Sears has filed for Chapter 11 bankruptcy protection, buckling under its massive debt load and staggering losses.
Sears once dominated the American retail landscape. But the big question is whether the shrunken version of itself can be viable or will it be forced to go out of business, closing the final chapter for an iconic name that originated more than a century ago.
The company, 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, incurring massive losses over the years.
The operator of Sears and Kmart stores joins a growing list of retailers that have filed for bankruptcy or liquidated in the last few years amid a fiercely competitive climate.
“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.”
Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing landlords to its tens of thousands of workers.
The filing, which is happening ahead of the crucial holiday shopping season, comes after rescue efforts engineered by its CEO and chairman Eddie Lampert have kept it outside of bankruptcy court — until now.
Lampert, the largest shareholder, 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.
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 comes due on Monday. Lampert personally owns 31 percent of the company’s shares. His hedge fund has an 18.5 percent stake, according to Factset.
“It is all well and good to undertake financial engineering, but the company is in the business of retailing and without a clear retail plan, the firm simply has no reason to exist,” said Neil Saunders, managing director of Globaldata Retail, in a recent analyst note.
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.
The company has $6.26 billion in losses, excluding one-time events, since its last annual profit in 2010, according to Ken Perkins pf the research firm Retail Metrics LLC. It’s had 11 years of straight annual drops in revenue. In its last fiscal year, it generated $16.7 billion in sales, down from more than $50 billion in 2008.