With Sears on the brink, what are shoppers to do?
After the parent company of Sears and Kmart department stores said Tuesday that there was “substantial doubt” whether it could stay in business, people might be wondering whether it’s safe to shop at the struggling retailer — and what will happen to Sears warranties and gift cards.
In January, Sears Holdings announced plans to close 150 stores. But what can shoppers expect if the retailer succumbs to its financial woes?
“The answer, of course, is that it depends — and there’s no easy answer,” said Tara Twomey, an attorney with the National Consumer Law Center (NCLC).
Currently, Sears Holdings is in the midst of a restructuring plan designed to rescue the 131-yearold retailer, and retail analysts say it’s possible the company may still survive.
If that plan fails, however, there is a chance that Sears will cease to exist — at least not as customers know it today.
A Sears spokesperson declined to comment for this article beyond a prepared statement from company CFO Jason Hollar. It said, in part, that the company is “a viable business that can meet its financial and other obligations for the foreseeable future.”
How the company chooses to wind down operations, and whether it is able to spin off its best-known brands, would largely determine how customers could redeem gift cards, make warranty claims, and get parts and service for items they’ve purchased.
One scenario, which Twomey called “unlikely,” is a bankruptcy in which all Sears’ assets are liquidated. In that case, retailer and extended warranties would not be honored, and gift cards would be worthless.
“If they completely shut down, just closed their doors, you wouldn’t be able to take advantage of that warranty,” she said. Prospects would be better for customers if the company reorganized under bankruptcy protection: “It’s possible that these warranties could survive,” she said. And even without coverage from Sears, some products may have manufacturer warranties that remain valid.
A more likely case is that Sears Holdings will continue attempts to spin off its remaining brands, like Kenmore appliances and DieHard automotive supplies.
Sears already completed a $900 million sale of its Craftsman brand of tools to Stanley Black & Decker. Although that sale is now a cause of some concern, the new owners announced plans to continue honoring warranties.
Katherine Hutt, a spokesperson for the Better Business Bureau, said that customers would likely be taken care of if Sears did fold. The company has been a BBB member since 1926 and currently has an A+ rating.
“A company like Sears that has been known for its customer service and its warranties and longterm guarantees on things like Craftsman tools — they’re not likely to leave customers in the lurch,” she said.