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Longtime Retailer Sears & Roebuck files for bankruptcy

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Longtime Retailer Sears & Roebuck files for bankruptcy

 
Old 10-17-18, 04:31 PM
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mmarshall
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Default Longtime Retailer Sears & Roebuck files for bankruptcy



Well, in an age of discount Walmart/Target stores, Home Depot, and Internet/Amazon business, I guess it had to happen sooner or later....Sears & Roebuck, one of the oldest and most well-known names in large department stores, is closing its doors and declaring bankruptcy. Also affected, of course, are the remaining K-Mart stores, which is owned by Sears. Sears, like Montgomery Wards, Ames, Zayres, Woodward & Lothrop, Hecht's, and a number of other large retailers, simply could no longer compete with newer, discount stores selling much of the same merchandise at lower prices. In the days before the Internet, of course (as I remember even back when I was a kid), if one did not visit the store directly, one could order merchandise out of the company's big, thick catalog...as many parents did at Christmas or back-to-school time for their kids. My late father, decades ago, ordered a Marshall family plaque/Coat-of-Arms from them...there was almost nothing you couldn't order from Sears in one form or another. Sad to see one of the oldest, most well-known, and well-respected names in the retail business fade away....but such is the effect of modern life, with the Internet and cheaper stores having taken over everything.

Here is the list of Sears and Kmart stores that are closing, effective with the bankruptcy announcement. The nearest one to me has actually been closed for two months now....and boarded up.

https://www.businessinsider.com/sear...g-list-2018-10

Wikipedia gives a good history of the company, for those who are interested.

https://en.wikipedia.org/wiki/Sears

Last edited by mmarshall; 10-17-18 at 04:42 PM.
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Old 10-17-18, 05:29 PM
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Sad though could be seen coming. Several closed up in our area in the past 8 months. The store interiors became pretty stale and that seemed obvious that spending to update wasn't going to help which relayed of other issues. Sears used to be our go to for various appliances but the big home centers had better choices. When the dishwasher needed replacement, Sears was pretty limited and same with the fridge. The Kenmore/LG product wasn't very appealing either.

As a kid I remember those huge catalogs that had pretty much everything. (Mongomery Ward's too.)
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Old 10-17-18, 06:33 PM
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been coming for a while. at least 4-5 years.

a lot of brick and mortar retailers going under. I know the one I work for is struggling, 2 years ago we had 3500 stores, scaled back to 3,000 this year and 2,500 next year.

Web orders are now over 70% of our business.

Personally I am getting out of retail, been in corp. IT for 12 years now, the hours suck, always have to work holidays.
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Old 10-17-18, 07:07 PM
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Though the general decline in retail is certainly a factor, the main reason Sears got to this point is that its CEO, Eddie Lampert, repeatedly and systematically made business decisions that were beneficial to him personally, but catastrophic for Sears Holdings and its shareholders. This includes things such as selling the more profitable sub-businesses to himself, or purchasing the real-estate of sub-performing stores and then NOT closing them so he could continue to collect rent. He has made billions out of running this company into the ground.

Sears had sufficient brand equity and enough individually profitable business lines that it could have survived had it been headed by leadership that was actually interested in success and profitability.

Last edited by geko29; 10-17-18 at 07:12 PM.
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Old 10-17-18, 08:32 PM
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Originally Posted by geko29 View Post
Though the general decline in retail is certainly a factor, the main reason Sears got to this point is that its CEO, Eddie Lampert, repeatedly and systematically made business decisions that were beneficial to him personally, but catastrophic for Sears Holdings and its shareholders. This includes things such as selling the more profitable sub-businesses to himself, or purchasing the real-estate of sub-performing stores and then NOT closing them so he could continue to collect rent. He has made billions out of running this company into the ground.

Sears had sufficient brand equity and enough individually profitable business lines that it could have survived had it been headed by leadership that was actually interested in success and profitability.
what kind of board of directors let a ceo get away with all that? or if what you say is true, how come there weren't endless lawsuits? plus what you say sounds more like fraud or sec violations. ???
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Old 10-18-18, 05:24 AM
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Originally Posted by bitkahuna View Post
what kind of board of directors let a ceo get away with all that? or if what you say is true, how come there weren't endless lawsuits? plus what you say sounds more like fraud or sec violations. ???
The lawsuits are coming:

https://finance.yahoo.com/news/lampe...090023191.html

And one lawsuit for self-dealing has already settled, for a pittance of $40 million.

As for the board, Lampert had a stranglehold on the entire company:

Lampert was at one point simultaneously Sears’s CEO, board chairman, transaction partner, landlord, and banker. (Upon the bankruptcy filing, he stepped down as CEO.) Because of his outsized role as Sears’s number-one creditor, he stands to gain in a bankruptcy even if his shares of Sears stock get wiped out. Through this ploy, Lampert has been able to transfer to himself all the salvageable assets of the company. And so far, it’s worked out.
Here's details on one of his schemes, most of which run through his hedge fund, ESL Investments:

But it’s important not to overlook Lampert’s other Sears-related revenue streams. First, Lampert has been lending Sears enormous amounts of money. It’s standard practice in a private equity–style play to load up the portfolio company with debt as a means by which the private equity lender can extract the corporate cash flow. It’s decidedly atypical for the CEO himself to be the lender, however. As of now, Lampert’s ESL and a related fund called JPP own roughly $2.66 billion in Sears debt. The cash flow just on the interest on these notes is between $200 million and $225 million per year.

This figure continues to grow—ESL announced on Monday another $300 million debtor-in-possession loan to support operations through the end of the year.

Presumably, this debt would be significantly curtailed in bankruptcy. However, a fair bit of the debt is secured by Sears’s real-estate assets. For example, real-estate collateral on 46 Sears properties backs a $500 million loan ESL made in January 2017; the bankruptcy could lead to Lampert’s fund simply obtaining those property rights. In all, Lampert’s interests own around $1.5 billion in secured debt backed by real estate.

ESL previously proposed an out-of-court restructuring proposal in which Sears would repurchase all the secured debt at full value, which would essentially have been a direct transfer of tangible assets from Sears to Lampert. Other creditors rejected the plan. But since secured lenders are paid out first in bankruptcy, something like ESL’s proposal is likely to go through; Sears listed $7 billion in assets with its bankruptcy filing.
And another:

In 2015, Lampert split off 235 of Sears’s most profitable stores and 31 other Sears real-estate holdings, selling it to a publicly traded real-estate investment trust (REIT) called Seritage Growth Properties for $2.7 billion. The sale/leaseback deal, common in private equity, has Sears paying Seritage rent on the use of the Sears facilities it once owned. Lampert’s hedge fund owns 43.5 percent of the Seritage limited partnership; he serves as its chairman.

Since 2015, Sears has paid $349 million to Seritage in rent, as well as installment expenses like insurance, property taxes, and utilities, according to its 2017 annual report, along with another $45 million in termination payments from shuttered stores (and as CEO, Lampert made the decisions on what stores to shutter). Moreover, when Sears does terminate leases with Seritage, the REIT is free to negotiate alternative development on the properties. As of September, Seritage has announced 94 redevelopment projects totaling $1.4 billion in investment, with “targeted incremental returns of approximately 11 percent,” according to a Seritage press release.

It wasn’t only real estate that Lampert signed over to himself. In 2014, Sears sold Land’s End, a clothing brand, to a consortium that was two-thirds controlled by ESL. Today, the brand has a rough market value of $314 million. In 2016, Sears sold Craftsman brand tools to Black & Decker for $900 million. The profits were used to pay off debt, including to Lampert. In 2017, Die Hard batteries were put up for sale. And this year, Lampert has made a $400 million bid for Kenmore appliances, the crown jewel of what remains at Sears, along with an $80 million bid for Sears Home Improvement stores.

So the leadership of the Sears empire—Lampert—is gradually selling off bits and pieces of it, mostly to Lampert. The cash generated from those deals in large part serviced Sears’s debt, the payments on which also went to Lampert. And now, having put Sears into bankruptcy, the top creditor—Lampert—stands to gain from the final fire sale.
Apologies for all the bolding. There's a lot to unpack in just a few short paragraphs.

source: http://prospect.org/article/how-sear...ed-its-own-ceo

Last edited by geko29; 10-18-18 at 05:29 AM.
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Old 10-18-18, 05:37 AM
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Mostly unrelated to Lampert's schemes, there's also talk that a Sears bankruptcy could drive JC Penney to failure as well. Currently about a quarter of JCP stores are in malls with what is called a "dark anchor", or an anchor store that is not operational. Should Sears liquidate rather than restructure, that number will go up to 48%. Anchors drive foot traffic, and their absence gives off a "deserted" vibe to the entire mall. So despite an initial uptick in sales due to a major competitor leaving the marketplace, the expectation would be that sales at all stores at malls containing a closed Sears (and not replaced by another major retailer) would suffer.

https://www.marketwatch.com/story/a-...ers-2018-10-11
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Old 10-18-18, 07:04 AM
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Originally Posted by geko29 View Post
Mostly unrelated to Lampert's schemes, there's also talk that a Sears bankruptcy could drive JC Penney to failure as well.
I hope not. I do a significant amount of my apparel shopping at the J.C. Penney's Big and Tall Men's department....if I can't find what I want at Walmart. Penney's, of course, is usually not as low-priced as Walmart, but they have excellent sales/promotions, price-specials, a lot of mail-coupons, and you can really get some bargains there on occasion, under the right circumstances. Walmart is always low-priced (IMO, the lowest on the market), but they don't have sales or specials, and don't have a dedicated Big and Tall section for men, though you can (sometimes) find some of the large sizes mixed in with the smaller sizes. Penney's is one of the few places you can get Big and Tall stuff at reasonable prices. I gave up on the regular Big and Tall shops years ago....they were just too much of a rip-off.
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Old 10-18-18, 07:07 AM
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Originally Posted by bitkahuna View Post
what kind of board of directors let a ceo get away with all that? or if what you say is true, how come there weren't endless lawsuits? plus what you say sounds more like fraud or sec violations. ???
Originally Posted by Geko29
The lawsuits are coming:
If all of this is true, then, yes, lawsuits would not be a surprise. CEOs, though, especially of larger companies, are usually paid and compensated so well that they don't have to steal or come up with schemes like that...there is little incentive to do so.
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Old 10-18-18, 08:55 AM
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I'm in need a some new tools and the liquidation sales should be quite good for Craftsman sales. and now Lowes honors the Craftsman lifetime warranty so nothing to lose really..
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Old 10-19-18, 04:27 AM
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I just thought... "when every shop becomes dematerialized, shoplifting will cease to exist under it's actual form".
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Old 10-19-18, 05:43 PM
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Originally Posted by mjeds View Post
I'm in need a some new tools and the liquidation sales should be quite good for Craftsman sales. and now Lowes honors the Craftsman lifetime warranty so nothing to lose really..

Sears was a innovator in a number of lifetime-warranty products. Not only with the famous Craftsman tools, but the automotive Die-Hard battery, which once had a lifetime warranty, and then was gradually scaled back to 20 years, 10 years, 5 years, and now 3 or 4 years. The new name for the battery is Die-not-so-Hard LOL. I'm not totally positive on this, but I think they also had a line of lifetime-warranty garden hoses.
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Old 10-20-18, 11:34 AM
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It was inevitable ever since their craftsman tool line went down hill.
I have never set foot inside sears as far as I can remember.

Originally Posted by RA40 View Post
Sad though could be seen coming. Several closed up in our area in the past 8 months. The store interiors became pretty stale and that seemed obvious that spending to update wasn't going to help which relayed of other issues. Sears used to be our go to for various appliances but the big home centers had better choices. When the dishwasher needed replacement, Sears was pretty limited and same with the fridge. The Kenmore/LG product wasn't very appealing either.

As a kid I remember those huge catalogs that had pretty much everything. (Mongomery Ward's too.)
I also loved flipping through the BEST catalog too

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Old 10-20-18, 05:31 PM
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Originally Posted by GS3Tek View Post
I have never set foot inside sears as far as I can remember.
Neither have a lot of other people, since the rise of Walmart and the other El-Cheapo stores. That's one reason why Sears is going out of business.

I have to confess that I do a lot of shopping at Wal-Mart myself.....occasionally at J.C. Penney's, which also has some nice stuff at reasonable prices. The last thing I bought at Sears was a Maytag washer, a number of years ago.
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Old 10-20-18, 08:17 PM
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I have always liked SEARS. The Canadian version went out of business a year ago or so, I would still go into a store once in a while in Rochester or Buffalo NY, but they seemed to lose their luster over the years. Too bad the got rid of their catalog back in the 90s.
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