Sears’ legacy lives on

Chicago Tribune (Sunday) - - BUSINESS - lzum­[email protected]­ Twit­ter @lau­ren­zum­bach

Re­gard­less of whether Sears sur­vives, the com­pany’s im­pact remains — es­pe­cially in the Chicago area — in build­ings, busi­nesses and brands that may long out­last the stores them­selves.

Here’s what you need to know ahead of the bank­ruptcy auc­tion on Mon­day.

Q: Sears used to be the coun­try’s big­gest re­tailer. What hap­pened?

A: On­line shop­ping is part of the story, but Sears’ chal­lenges go back decades. It was slow to re­act to new com­pe­ti­tion from dis­count chains and spe­cialty stores and to changes in shop­ping habits, in­clud­ing a shift away from sub­ur­ban shop­ping malls. Lam­pert was ac­cused of fo­cus­ing on cost­cut­ting at the ex­pense of in­vest­ing in stores. He in­sisted the com­pany was work­ing to turn it­self into a smaller but prof­itable re­tailer. As time went on, Sears kept shrink­ing — clos­ing hun­dreds of stores and get­ting rid of more than 60 per­cent of its em­ploy­ees in less than three years. But it also con­tin­ued los­ing money, rack­ing up more than $11 bil­lion in losses since 2011.

Q: The com­pany planned to re­or­ga­nize in bank­ruptcy. Why is it now at risk of shut­ting down?

A: It’s pos­si­ble ESL won’t emerge as the win­ning bid­der, and it’s not clear whether the com­pany has any other of­fers from buy­ers who want to save, rather than liq­ui­date, Sears. An at­tor­ney rep­re­sent­ing Sears cred­i­tors told the U.S. Bank­ruptcy Court at a hear­ing Tues­day in New York that it con­tin­ues to have “sig­nif­i­cant con­cerns” about ESL’s bid. The con­cerns cred­i­tors have about ESL’s bid have to deal, in part, with fi­nan­cial deal­ings be­tween Lam­pert, ESL and Sears. The cred­i­tors say those trans­ac­tions “may be part of an ex­tended pat­tern of con­duct that served to ben­e­fit cer­tain (in­sider) eq­uity hold­ers,” ac­cord­ing to court fil­ings. ESL de­nied those al­le­ga­tions.

Q: What are the po­ten­tial out­comes?

A: Lam­pert’s ESL has said it will strive to keep Sears in busi­ness if it wins the bid. But even if the com­pany liq­ui­dates, the Sears Home Ser­vices busi­ness or brands like Ken­more and DieHard could live on. ESL also has said it would bid on some pieces of the busi­ness in­di­vid­u­ally. It’s also pos­si­ble that some­one could buy Sears’ in­tel­lec­tual prop­erty and try to bring the brand back on­line or in bricks-and-mor­tar stores.

Q: Will more stores close?

A: Sears has al­ready closed or an­nounced plans to close 262 Sears and Kmart stores by late March. Lam­pert’s ESL has said it wants to buy the re­main­ing 425 stores in the bank­ruptcy auc­tion, though it could change its bid or de­cide to close more stores af­ter buy­ing the com­pany. If Lam­pert’s push to keep the com­pany alive fails, the fate of the stores will de­pend who ends up buy­ing Sears’ as­sets.

Q: What will hap­pen to Sears’ em­ploy­ees?

A: If Lam­pert wins the bank­ruptcy auc­tion and keeps Sears in busi­ness, his fund has said it ex­pects to em­ploy up to 50,000 peo­ple. If Sears goes out of busi­ness, those jobs would dis­ap­pear. The com­pany said it had 68,000 em­ploy­ees, in­clud­ing 32,000 full-time work­ers, when it filed for bank­ruptcy in Oc­to­ber.

Q: If there’s a chance to keep stores open and work­ers on the job, why wouldn’t the court au­to­mat­i­cally choose that op­tion?

A: Bank­ruptcy courts would gen­er­ally rather not liq­ui­date a com­pany that has a chance of suc­ceed­ing af­ter ex­it­ing bank­ruptcy. But the pri­or­ity is re­cov­er­ing as much of the money the com­pany owes as pos­si­ble, and the judge could de­cide it would be bet­ter to sell the re­main­ing as­sets im­me­di­ately to pay back the com­pany’s lenders.

Q: What hap­pens next?

A: Sears will aim to no­tify the Bank­ruptcy Court of the auc­tion re­sults by Wed­nes­day, ac­cord­ing to a time­line ap­proved by the court. Other par­ties have eight days to chal­lenge the out­come in court. Ul­ti­mately, a judge has to ap­prove the sale of Sears’ as­sets, a de­ci­sion ex­pected in the com­ing weeks.


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