Sears filed for Chapter 11 bankruptcy early Monday morning, bringing to a head the decades-long decline of an icon of American retail.
The 125-year-old company, which at its peak had more than 300,000 employees and nearly 3,500 stores, has closed more than 1,700 locations around the country in the past decade in a bid to return to profitability, which it hasn’t seen since 2010. Following its merger with Kmart in 2005, the discount chain’s store count shrank by more than 75 percent to just over 300 stores today.
As part of the terms of the bankruptcy, Sears Holdings Corp. chairman and CEO Eddie Lampert will step down from the chief executive role, to be replaced by three Sears executives who will manage daily operations. With his hedge fund ESL Investments Inc., Lampert is the company’s largest shareholder and creditor, and is owed roughly $2.5 billion from Sears.
The billionaire has been criticized throughout his tenure for refusing to update the company’s stores and inventory, spend money on advertising or innovate in e-commerce. Instead, he funneled money into share repurchases and later generated extra cash by offloading real estate (largely to a spinoff REIT he also controls, which has redeveloped many into high-end office spaces and mixed-use properties) and selling several Sears-owned brands, including Lands’ End and Craftsman tools.
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These proved to be temporary fixes, however, as run-down Sears and Kmart stores in already-struggling malls failed to draw in shoppers. To be sure, many of the retailer’s competitors have experienced similar pains throughout the past decade: Macy’s has cut around 100 stores since 2016, J.C. Penney Co. Inc. slashed 138 last year, and Lord & Taylor sold its landmark Fifth Avenue flagship to WeWork in an effort to trim one-fifth of its total real estate.
What these closures make clear is that it’s impossible for retailers to rest on their laurels in a space that’s teeming with innovative competitors, including online heavyweights like Amazon, upstart direct-to-consumer brands and brick-and-mortar chains like Walmart, Target and Nordstrom that are investing heavily to stay on the cutting edge.
With a $300 million loan from Wall Street investors, Sears will continue to pay its employees and remain open through the holidays, but after that, its future is uncertain.