Bankruptcy filing by Sears seen as imminent

More than a century ago, Sears pioneered the strategy of selling everything to everyone.

But it has long since given up that mantle as a retail innovator. It was overtaken first by big-box retailers such as Walmart and Home Depot, and then by Amazon, as the go-to shopping destinations for clothing, tools and appliances.

In the past decade, Sears had been run by a hedgefund manager, Edward Lampert, who sold off many of the company’s valuable properties and brands but failed to develop a winning strategy to entice consumers who increasingly shop online.

The result has been a long, painful decline. A decade ago, the company employed 302,000. Today, about 68,000 people work at Sears and Kmart, which Lampert also runs.

Now, the retailer is preparing a Chapter 11 bankruptcy filing to cut its debts and keep operating at least through the holidays, according to two people briefed on the matter who spoke on condition of anonymity to discuss the company’s plans.

As part of the reorganization plan, which was expected to be filed Sunday night, Sears is to receive a loan of more than $500 million to help keep its shelves stocked and employees paid, these people said.

The company also plans to close as many as 150 additional stores as it tries to reduce costs and find some way forward.

“It’s a sad day for American retail,” said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm. “There are generations of people who grew up on Sears, and now it’s not relevant. When you are in the retail business, it’s all about newness. But Sears stopped innovating.”

During the last five years, the company lost about $5.8 billion, and over the past decade, it shut more than 1,000 stores. Many of the 700 stores that remain have frequent clearance sales, empty shelves and handwritten signs.

Sears stores remain the centerpiece of hundreds of shopping centers across the United States, and their decline has reduced traffic to many of those malls.

Running low on cash, the company has a $134 million debt payment due Monday. Its total debt stood at about $5.6 billion in late September.

Over the weekend, a group of banks were negotiating with Sears over the terms of a new loan, totaling more than $500 million, the people briefed on the matter said.

Reorganizing Sears will not be easy. The company’s e-commerce business has only a tiny fraction of the sales of Amazon, one of the world’s most valuable companies. And bringing back customers to Sears stores will take investment that the company probably cannot afford.

As many as 100,000 retired Sears employees receive pensions, which are expected to emerge largely unscathed from the bankruptcy. As the company was bleeding cash and selling off assets in recent years, federal regulators required Lampert to inject cash into the pension plan. However, other benefits for retirees such as life insurance could be in danger.

“It is sad to see the company you really loved go down the tubes,” said Ron Olbrysh, 77, who worked in Sears’ legal department for 24 years and now heads an association of retired workers.

Sears’ shares, which topped $120 as recently as 2007, closed Friday at 40.7 cents.

Founded shortly after the Civil War, the original Sears, Roebuck & Co. built a catalog business that sold Americans the latest dresses, toys, build-it-yourself houses and even tombstones. In their heyday, the company’s stores, which began to spread across the country in the early 20th century, were showcases for must-have washing machines, snow tires and furniture.

More recently, Sears became known for another distinction: Lampert’s audacious feats of financial engineering. He has spun off numerous assets from the retailer into separate companies that his hedge fund invests in. While many of these spinoffs have flourished, Sears has slid toward insolvency.

The rise of e-commerce has contributed recently to a record number of store closings and retail bankruptcies, including filings by Sports Authority, Payless Shoes and Toys R Us. Like Sears, Toys R Us had tried to reorganize, but the company eventually shut down and laid off all its employees in June when its lenders concluded that the business was no long viable.