Sears files for Chapter 11 bankruptcy
NEW YORK — Sears filed for Chapter 11 bankruptcy protection Monday, with plans to shutter 142 unprofitable stores in the hopes that it can stay in business.
The question now is whether a smaller version of the company that once towered over the American retail landscape can be viable. 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.
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.
"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 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. And it's very sad what happened, very, very sad," he said to reporters on Monday outside of the White House. But Trump added that many of the Sears' sites will be put to "good use" and mean a lot of 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The company has struggled with outdated stores and complaints about customer service even for its once crown jewels: major appliances like washers and dryers.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 like 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.
Sears Holdings will close 77 Sears stores and 65 Kmart stores near the end of the year and liquidation sales are expected to begin shortly. That's in addition to the closure of 46 unprofitable stores that had already been announced.
Edward S. Lampert, the company'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 Lampert's ESL Hedge fund.
The filing listed between $1 billion and $10 billion in assets while liabilities range 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.