Ailing Sears files for bankruptcy
‘Too much rot has set in ... to make it viable’, analysts say of former retail icon
Before there was Amazon — or, for that matter, Home Depot or Walmart or Kmart — there was Sears.
For generations of Americans, the brick-like Sears, Roebuck and Co. catalogue 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-storey 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.
Plagued by falling sales and heavy debt, Sears filed for Chapter 11 bankruptcy reorganization Monday and announced plans to close 142 of its 700-plus remaining stores in a bid to stay afloat, if only for a while.
Hedge fund manager Eddie Lampert bought the company in 2005 and created Sears Holdings Corp. He began cutting expenses and selling off real estate, but the hemorrhaging continued.
Analysts have their doubts it will survive.
“In our view, too much rot has set in at Sears to make it (a) viable business,” Neil Saunders, managing director of GlobalData Retail, said in a note to investors.
Its bankruptcy was years in the making. Sears diversified too much. It kept cutting costs and let its stores become fusty in the face of increasing competition from the likes of Walmart and Target. And though it expanded onto the internet, it was no match for Amazon.
“In point of fact,” Cohen said, “they’ve been dead for a very long time.”
In its bankruptcy filing, Sears Holdings, which operates both Sears and Kmart stores, listed assets of US$1 billion to US$10 billion and liabilities of US$10 billion to US$50 billion. It said it has lined up US$300 million in financing from banks to keep operating and is negotiating an additional US$300 million loan.
The company once had around 350,000 employees; as of Monday’s filing, it was down to 68,000. At its peak, it had 4,000 stores in 2012; it will now be left with a little more than 500.
Sears was born in 1886, when Richard W. Sears began selling watches to supplement his income as a railroad station agent in North Redwood, Minn. By the next year, he had opened his first store in Chicago.
The company published its first mail-order catalogue in 1888. Together with companies like Montgomery Ward and J.C. Penney, Sears helped bring American consumer culture to middle America.
“It’s hard to imagine now how isolating it was to live in a small town 100 years ago, 120 years ago,” said Marc Levinson, author of “The Great A&P and the Struggle for Small Business in America.”
“Back before the days of cars, people might have a ride of several days in a horse and buggy just to get to the nearest train railhead, nearest train station.”
By the late 1960s, Sears was the world’s largest retailer. In 1975, it completed the black Sears Tower, which at 1,450 feet (442 metres) was the world’s tallest skyscraper for 25 years.
Between 1981 and 1985, the company went on a spending spree, acquiring the stock brokerage Dean Witter Reynolds and the real estate company Coldwell, Banker. It launched the Discover credit card nationwide.
“They diverted all of their retail cash flow into other enterprises,” Cohen said. “And the retail business had come apart at the seams.”
Sears eventually got rid of those businesses. Sears Canada Inc. liquidated a year ago and about 12,000 people lost their jobs. Lampert partially spun off the company from its parent in 2012 and was Sears Canada’s biggest shareholder.
And to save money and generate capital, it sold off some of its most familiar brands, Craftsman and DieHard among them. In 1993, it killed the general merchandise catalogue. Not long thereafter, it sold its skyscraper.
Levinson said that for too long, Sears catered to “a broad middle market” and failed to change with the times.
Eventually, Cohen said, Sears will disappear.
“It’s an American tragedy,” he said. “It did not have to be this way.”