The Sears Bankruptcy Is a Cautionary Tale for Hedge Fund Managers
- Author: Darren Santiago Oct 16, 2018,
Oct 16, 2018, 4:39
The 125-year-old business, which held the crown of the world's largest retailer in the Sixties, plans to close 142 of its 700 stores after filing for Chapter 11 bankruptcy protection on Monday.
Shoppers can expect more Sears store closures, as well as Sears liquidation sales, in brick-and-mortar locations around the country: The company says it will be closing an additional 142 stores by the end of the year.
"As a kid, everyone would talk about Toughskins from Sears", said Tammy Duke of Butner, who wore the jeans as a child.
The company said it meant to reorganize around a smaller store platform, a strategy it said would help save tens of thousands of jobs.
The company has closed several hundred stores in recent years.
"Everything I have done as an investor in Sears Holdings has been with the goal of helping the company and its people succeed", Mr. Lampert said in a statement provided by his hedge fund.
Lampert said in a statement the Chapter 11 process will give Sears "the flexibility to strengthen its balance sheet" and find the right size for its operating model to turn a profit. It has been run over that period by the hedge fund manager Eddie Lampert, who sold off numerous firm's brands and properties but failed to win customers back, many of whom now prefer to shop online.
Sears is planning to seek bankruptcy protection in NY as soon as Sunday night, though a court filing could slip into Monday, the sources added, asking not to be identified because the negotiations are confidential. A long series of store closings has left it with under 900 today.
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As for digital investment, you could pay off Sears' debt if you had a dime for each news article faulting Lampert for spending too much on digital and not enough on remodeling retail stores. "They're going to close another 20 per cent of the stores immediately with more to come under any restructuring plan".
Among stores closing are five Kmarts in NY, including the Kmart at 987 Route 6 in Mahopac. Lampert is stepping down as CEO while remaining the company's chairman.
But rival retailers from a variety of categories should see this moment for what it is: It is Sears's last gasp.
The last Sears department store in Louisville is set to close.
Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with a loyalty program. The first Sears Roebuck catalog, which sold watches and jewelry, was printed in 1896.
Washington Prime Group, which owns the Westshore store (the last Sears remaining in Tampa), negotiated to terminate Sears lease early and has taken ownership of the space with plans for something new.
There will be no immediate impact to merchandise pricing (stores are not now liquidating).
Getting out of these ancillary businesses was supposed to allow Sears' executive team to focus on luring people to Sears stores to buy consumer goods again - but they had limited success.