Our Sears store is finally closing it's doors this month. It took long enough.
20 years ago I worked there, selling Packard Bell and Macintosh computers, as well as vaccums. Who decided those departments should be merged, I don't know. Once in a while I'd sub at a smaller store about 45 minutes away, and cameras got thrown into the mix.
I always liked the Sears Auto Center for tires, service, and Diehard batteries. Craftsman hand tools were decent until the mid-2000's when they started changing warranty policies.
The power tools and lawn equipment were never really any good. If you buy a 'Craftsman' mower, you're getting the same Chinese-engined lawnmower that you buy at the same price point at any other store. Just like any other product these days.
They used to have an entire part of the store dedicated to flat-screen TV's. As they cheapened, the area got smaller and smaller, until it was 4-5 sad TV's hanging on a wall. Just this last year they decided to fill that part of the store with mattresses.
I noticed the store filling up with Craftsman, Kenmore, and other Sears-branded junk. Just low end stuff like cheap shoes, plastic utensils, and pots and pans. I figured distributors weren't willing to give Sears enough credit to stock the stores with stuff of any value.
The store itself hasn't been kept up in forever. Most of the ceiling tiles are stained from leaks. the carpets are probably as old as I am, everything is broken, and it doesn't even feel like they turn the heat on in the winter.
I don't know if Sears selling higher quality stuff would really matter.
Departments stores seem almost entirely doomed to fail because of the combo of more specialty retail (buying clothes at a clothing store as opposed to department store), Amazon/ecommerce, discount retail (TJX family), and, of course, giants like Walmart being able to operate better.
Stores like Target and Meijer are able to fill the void of shopper wishing to avoid Walmart so I don't see a ton of space for anyone else.
Certainly Sears could have positioned itself better to evolve into something closer to Target but that ship sailed at least 20 years ago and Sears being mostly anchored to shopping malls didn't help its cause much.
The Sears attached to my hometown's mall was shut down 2 or 3 years ago. The space is currently being destroyed so they can develop an outdoor entertainment space.
I bought a craftsman mower from Sears in the late 00's. It had a Briggs and Stratton engine, it was a great unit.
Sears has no identity anymore. It used to be the-place for appliances, automotive tools, and lawn equipment. Now it's like a Macy's with tools and lawn equipment.
I'm planning on picking up some scratch and dent applicances at the Sears outlet soon. That's really all I interact with Sears anymore.
The department stores have the same sort of death spiral as malls - the quality drops, people stop going in, the quality drops again.
I’ve never in my life felt going to a department store I’d be met by someone knowledgeable in an area other than makeup.
One thing I’d have loved to see - an emphasis on customization and tailoring. Almost everyone could use a little custom tailoring for pants, blouses and shirts, and it does not scale online well at all as you need to be in person to get measured. If you like a shirt and it’s ill fitting, pay $15/20 for a cheap hem job and walk out feeling like a million bucks.
I still have my parents’ riding Craftsman mower from over 20 years ago and it runs like a top, so maybe at some point they made good mowers. It has an engine with a spin on oil filter like a car and I attribute the engine longevity to that. My Mom has been through like three riding Craftsman mowers since then and each one seems more cheap and crappy than the last. The latest one is like a playskool mower with the dumbing down of the controls and big colorful plastic levers.
The private equity leveraged buyout play by the cash and value extractors.
Careful leaving too much cash or value creation lying around, the extractors will come seeking it, and take it if you aren't vigilant.
Sears lost that battle long ago. In an alternate dimension, a value creator is in charge of Sears decades ago, and there is a nice competition of Amazon, Walmart and Sears in that place, making pricing even better for consumers. In our current dimension, Sears management got too comfortable counting the beans.
What I have yet to figure out is how so many of the other shareholders let it continue long after it was obvious. It gives serious questions to the assumption that shareholders provide any sort of input into the management of public companies.
Grubstakers had a good deep-dive on how Lampert drove Sears into the ground with his half-cocked, self-enriching schemes. My favorite part was the mandatory internal social network he implemented, where he spent hours arguing with employees through sock-puppet accounts:
The bad assumption of this article is that the goal of Kmart/Sears in bankruptcy is to get out of bankruptcy. That is completely false.
The entire goal of the Sears/KMart management is to siphon shareholder value and money from the parent company into shadow companies that the executive team owns, while saddling the main company with increasing debt and passing it through various stages of bankruptcy. At each stage the maangement will pilfer real estate and other main corporate assets from the main company.
I was hoping something would come out during the bankruptcy proceedings. But it seems that Lambert's buyout bid didn't result in any challengers putting forth specific and substantive self-dealing claims, at least none that would persuade a court to reject Lambert's offer.
Note: I can't read the WSJ article. I have subscriptions to NYT, FT, Bloomberg, and The Atlantic, but not WSJ.
I don't think I understand the financial system of bankruptcy very well, I always thought that bankruptcy was a hard end of the line---your assets are seized and sold off to pay back debts, etc. I've also heard business cases while in school about companies like Kodak where bankruptcy seemed to be the end. Can someone explain how bankruptcy often results in companies continuing to run?
Edit: Thanks for the responses everyone. I'll do a bit more reading on chapter 7 vs chapter 11, very interesting stuff.
At a high level, there are reorganization and liquidation type bankruptcies.
Some companies get into trouble with debt, are victims of economic winds or otherwise get into trouble. But the business is fundamentally still viable. So the company declares chapter 11 bankruptcy, is able to break out of unsustainable contracts, and the suppliers take a haircut.
Other companies are just done. So they declare chapter 7 bankruptcy, sell off anything of value, and pay out creditors based on the judge/bankruptcy trustees order.
The loan holders get their say in the bankruptcy process. In fact they have first say.
It all comes down the the judge saying "hey banks, you will never get your money paid back, what option to get some of it back do you want us to take. Options are the company doesn't pay for a few months while they make some changes, and then continue paying off their loans, or the company is sold and the bank gets the proceeds of the sale - one common variation of the latter is the bank gets ownership of the company to run as they see fit. Again, the bank gets first say, though the company will make proposals, and the judge will force things.
Of course in the real world it isn't one bank, it is hundreds of banks and bond holders each who want their say, and there are contracts saying what say each party has. The judge is just there it get all of them into court and come up with an agreement that as many can accept as possible. Sometimes that means the judge says to one bank you want X, but everyone else wants Y so you lose. Bankruptcy is common enough that judges (and any bank) understands how to deal with it and the rules are common.
Bankruptcy can take two forms. The key question is, "if this company got out from under its debt and didn't have to service it, is it still a viable company?"
If there is actually a viable business there, it makes sense to wipe out the shareholders, extinguish the debt, and make the former bondholders the new shareholders.
If there is no viable business even with the debt, then liquidation is the right path.
(I'm not a finance professional, just another person on the internet with an opinion.)
There are different types of bankruptcy. For businesses, chapter 11 bankruptcy allows time for court supervised restructuring of debt, on the theory that there is often value in an insolvent business, if the cash flow can be re-arranged.
Planet Money is great for introduction to a lot of economic concepts, including in this case, the idea bankruptcy leniency being an advantage for the economy.
There are maybe more subtle areas of economics for which I don't fully agree with it's model of the world, but I still think it's a pretty good podcast for starting econ.
suppose sears goes bankrupt and the bank wants to sell off the assets of the company to recoup some of its loss. The name "sears" has a value and is something that can be sold.
> I always thought that bankruptcy was a hard end of the line
nope. only thing bankruptcy guarantees is that creditors are prevented from getting your assets and have to negotiate to see if there is anything they can get
forces people to the table all at once to see what kind of possibilities there are
The whole saga is an interesting tale of hubris from Eddie Lampert who was a very good hedge fund speculator who thought that would translate into being a good retail store operator but it didn't seem to work out. https://www.forbes.com/sites/michaellewitt/2018/11/07/do-not...
It never seems to pan out. Jack Tramiel, of Commodore fame, burned all his retail partners so many times nobody wanted to carry Atari computers anymore. His 'genius' solution was paying $67m for a chain of malls https://www.nytimes.com/1987/08/25/business/atari-to-acquire... He ended up losing at least twice that amount in less than two years before writing it off.
I don't follow this story closely, but I bet somebody here does:
My sense is that yeah there's Amazon and all the other missed opportunities, but don't they also have some corporate raider type as CEO who's totally cashing in on running this chain into the ground?
"… ESL hasn’t lost the entire $1.5 billion it invested in Sears and Kmart equity. Including the gains and losses on the major spin-offs, dividends, and interest income, it appears that loss was narrowed to about $624 million. Adding back the $2 billion in gains from hedge fund fees would give Lampert a net profit of approximately $1.38 billion. And that’s not even counting the uncertain value of his $2.6 billion in Sears debt, with its liens on Sears real estate, among other items."
Industry consensus is that no one would have chosen to make this investment if they knew what the next 10 years would look like, but given those abysmal results, he did far better than any other stakeholder.
Oh yes. There is plenty to read about Eddie Lampert. He would like it to read like an Ayn Rand novel, but that's not the case (out maybe it is, but not in the way he was expecting).
What you can get at Sears you can get better at Mavis Discount Tire (much faster tire replacement), Kohls (better, cheaper clothes), or Home Depot (bigger tool selection). The main problem with Sears is that they forgot to focus on keeping the quality up and customer service.
I mean this seems obvious from a thousand miles away.
Amazon changed the game fundamentally. The only two effective strategies are to challenge them directly (Wal-Mart and their logistics and their free 2 day shipping/no membership website competitor) or to effectively blend the store/online experience with a huge push towards mobile ordering and curbside pickup or gig-style personal shopping delivery.
I'm not sure why Sears thought they could half-ass this transition and kind of do nothing to compete in today's market. Last time I was in a Sears, it was eerie and quiet, it smelled old, the prices were NOT GREAT and I ultimately priced the tools I wanted on Amazon for a good discount. Not like the old Sears Craftsman name and warranty mean much anymore anyway.
More upscale retail is mostly still doing OK. The well-documented decline of malls is mostly more rural, less upscale properties. (Some chains including, surprisingly, Best Buy are doing OK in spite of online.) Big Box home improvement also seems to be doing OK.
Sears in particular really didn't know what it wanted to be. It did clothes (including buying Lands' End). It did tools, It did appliances. But it wasn't a discounter like Walmart. (Which drove a lot of regional discounters out of business.)
In short, it didn't have a strategy and tried to focus on everything.
I remember reading a long-form article about the decline of Sears and Lampert's meddling and so forth that was really interesting, I believe this is it:
You mean Eddie Lampert's plan to pillage all of the valuable assets, pile on company debt to buy the shares he owned, sue suppliers to keep providing inventory(!) and enrich himself at the expense of the employees and other stakeholders worked exactly as planned?[0]
There's a great book to be written about technology, leadership, and time hidden in this story regarding Sears collapse. Think about it: they were the original Amazon with catalog sales. Distribution, warehousing, they did it all. It was revolutionary and the dominated the market because of it. If they had real leadership in the early 2000's, they could have been Amazon again. But what happened?
I will be greatly surprised if Sears manages to come back from the dead after being largely gutted/looted by Edward Lampert.
Toys R Us seems to have met a similar fate of acquiring massive debt (in its case via a leveraged buyout rather than a merger) and then having all of the money sucked out, but I still hope it might return somehow.
Same thing is happening to all these retail chains who kept buying up physical real estate locations when the trend was clearly going against them. Sears had bad management for a long time and it clearly shows.
[+] [-] bluedino|6 years ago|reply
20 years ago I worked there, selling Packard Bell and Macintosh computers, as well as vaccums. Who decided those departments should be merged, I don't know. Once in a while I'd sub at a smaller store about 45 minutes away, and cameras got thrown into the mix.
I always liked the Sears Auto Center for tires, service, and Diehard batteries. Craftsman hand tools were decent until the mid-2000's when they started changing warranty policies.
The power tools and lawn equipment were never really any good. If you buy a 'Craftsman' mower, you're getting the same Chinese-engined lawnmower that you buy at the same price point at any other store. Just like any other product these days.
They used to have an entire part of the store dedicated to flat-screen TV's. As they cheapened, the area got smaller and smaller, until it was 4-5 sad TV's hanging on a wall. Just this last year they decided to fill that part of the store with mattresses.
I noticed the store filling up with Craftsman, Kenmore, and other Sears-branded junk. Just low end stuff like cheap shoes, plastic utensils, and pots and pans. I figured distributors weren't willing to give Sears enough credit to stock the stores with stuff of any value.
The store itself hasn't been kept up in forever. Most of the ceiling tiles are stained from leaks. the carpets are probably as old as I am, everything is broken, and it doesn't even feel like they turn the heat on in the winter.
[+] [-] ssharp|6 years ago|reply
Departments stores seem almost entirely doomed to fail because of the combo of more specialty retail (buying clothes at a clothing store as opposed to department store), Amazon/ecommerce, discount retail (TJX family), and, of course, giants like Walmart being able to operate better.
Stores like Target and Meijer are able to fill the void of shopper wishing to avoid Walmart so I don't see a ton of space for anyone else.
Certainly Sears could have positioned itself better to evolve into something closer to Target but that ship sailed at least 20 years ago and Sears being mostly anchored to shopping malls didn't help its cause much.
The Sears attached to my hometown's mall was shut down 2 or 3 years ago. The space is currently being destroyed so they can develop an outdoor entertainment space.
[+] [-] RHSeeger|6 years ago|reply
Such a shame; Craftsman used to be THE name in home tools. If one broke, you could bring it back for a replacement... forever.
[+] [-] linuxftw|6 years ago|reply
Sears has no identity anymore. It used to be the-place for appliances, automotive tools, and lawn equipment. Now it's like a Macy's with tools and lawn equipment.
I'm planning on picking up some scratch and dent applicances at the Sears outlet soon. That's really all I interact with Sears anymore.
[+] [-] taurath|6 years ago|reply
I’ve never in my life felt going to a department store I’d be met by someone knowledgeable in an area other than makeup.
One thing I’d have loved to see - an emphasis on customization and tailoring. Almost everyone could use a little custom tailoring for pants, blouses and shirts, and it does not scale online well at all as you need to be in person to get measured. If you like a shirt and it’s ill fitting, pay $15/20 for a cheap hem job and walk out feeling like a million bucks.
[+] [-] JohnJamesRambo|6 years ago|reply
[+] [-] zipwitch|6 years ago|reply
https://www.reuters.com/article/us-sears-lawsuit/sears-sues-...
[+] [-] drawkbox|6 years ago|reply
Careful leaving too much cash or value creation lying around, the extractors will come seeking it, and take it if you aren't vigilant.
Sears lost that battle long ago. In an alternate dimension, a value creator is in charge of Sears decades ago, and there is a nice competition of Amazon, Walmart and Sears in that place, making pricing even better for consumers. In our current dimension, Sears management got too comfortable counting the beans.
[+] [-] rch|6 years ago|reply
[+] [-] dv_dt|6 years ago|reply
[+] [-] claudeganon|6 years ago|reply
https://soundcloud.com/grubstakers/episode-105-eddie-lampert...
[+] [-] AtlasBarfed|6 years ago|reply
The entire goal of the Sears/KMart management is to siphon shareholder value and money from the parent company into shadow companies that the executive team owns, while saddling the main company with increasing debt and passing it through various stages of bankruptcy. At each stage the maangement will pilfer real estate and other main corporate assets from the main company.
Why this is tolerated, who knows.
[+] [-] wahern|6 years ago|reply
Note: I can't read the WSJ article. I have subscriptions to NYT, FT, Bloomberg, and The Atlantic, but not WSJ.
[+] [-] nscalf|6 years ago|reply
Edit: Thanks for the responses everyone. I'll do a bit more reading on chapter 7 vs chapter 11, very interesting stuff.
[+] [-] Spooky23|6 years ago|reply
Some companies get into trouble with debt, are victims of economic winds or otherwise get into trouble. But the business is fundamentally still viable. So the company declares chapter 11 bankruptcy, is able to break out of unsustainable contracts, and the suppliers take a haircut.
Other companies are just done. So they declare chapter 7 bankruptcy, sell off anything of value, and pay out creditors based on the judge/bankruptcy trustees order.
[+] [-] bluGill|6 years ago|reply
It all comes down the the judge saying "hey banks, you will never get your money paid back, what option to get some of it back do you want us to take. Options are the company doesn't pay for a few months while they make some changes, and then continue paying off their loans, or the company is sold and the bank gets the proceeds of the sale - one common variation of the latter is the bank gets ownership of the company to run as they see fit. Again, the bank gets first say, though the company will make proposals, and the judge will force things.
Of course in the real world it isn't one bank, it is hundreds of banks and bond holders each who want their say, and there are contracts saying what say each party has. The judge is just there it get all of them into court and come up with an agreement that as many can accept as possible. Sometimes that means the judge says to one bank you want X, but everyone else wants Y so you lose. Bankruptcy is common enough that judges (and any bank) understands how to deal with it and the rules are common.
[+] [-] siberianbear|6 years ago|reply
If there is actually a viable business there, it makes sense to wipe out the shareholders, extinguish the debt, and make the former bondholders the new shareholders.
If there is no viable business even with the debt, then liquidation is the right path.
(I'm not a finance professional, just another person on the internet with an opinion.)
[+] [-] howard941|6 years ago|reply
[+] [-] gefh|6 years ago|reply
[+] [-] dv_dt|6 years ago|reply
https://www.npr.org/sections/money/2015/09/05/437628996/epis...
There are maybe more subtle areas of economics for which I don't fully agree with it's model of the world, but I still think it's a pretty good podcast for starting econ.
[+] [-] blhack|6 years ago|reply
suppose sears goes bankrupt and the bank wants to sell off the assets of the company to recoup some of its loss. The name "sears" has a value and is something that can be sold.
[+] [-] rolltiide|6 years ago|reply
nope. only thing bankruptcy guarantees is that creditors are prevented from getting your assets and have to negotiate to see if there is anything they can get
forces people to the table all at once to see what kind of possibilities there are
[+] [-] tim333|6 years ago|reply
[+] [-] rasz|6 years ago|reply
[+] [-] lowercased|6 years ago|reply
[+] [-] Jgrubb|6 years ago|reply
My sense is that yeah there's Amazon and all the other missed opportunities, but don't they also have some corporate raider type as CEO who's totally cashing in on running this chain into the ground?
[+] [-] troydavis|6 years ago|reply
Institutional Investor tried to answer that question in http://institutionalinvestor.com/article/b1c33fqdnhf21s/Eddi.... Their take:
"… ESL hasn’t lost the entire $1.5 billion it invested in Sears and Kmart equity. Including the gains and losses on the major spin-offs, dividends, and interest income, it appears that loss was narrowed to about $624 million. Adding back the $2 billion in gains from hedge fund fees would give Lampert a net profit of approximately $1.38 billion. And that’s not even counting the uncertain value of his $2.6 billion in Sears debt, with its liens on Sears real estate, among other items."
Industry consensus is that no one would have chosen to make this investment if they knew what the next 10 years would look like, but given those abysmal results, he did far better than any other stakeholder.
[+] [-] ilogik|6 years ago|reply
[+] [-] TulliusCicero|6 years ago|reply
IIRC he's kind of an extreme libertarian who actively pitted different parts of the company against each other, to compete.
[+] [-] nkrisc|6 years ago|reply
[+] [-] swami26|6 years ago|reply
[+] [-] vermontdevil|6 years ago|reply
[1] https://www.institutionalinvestor.com/article/b1c33fqdnhf21s...
[+] [-] jdlyga|6 years ago|reply
[+] [-] criley2|6 years ago|reply
Amazon changed the game fundamentally. The only two effective strategies are to challenge them directly (Wal-Mart and their logistics and their free 2 day shipping/no membership website competitor) or to effectively blend the store/online experience with a huge push towards mobile ordering and curbside pickup or gig-style personal shopping delivery.
I'm not sure why Sears thought they could half-ass this transition and kind of do nothing to compete in today's market. Last time I was in a Sears, it was eerie and quiet, it smelled old, the prices were NOT GREAT and I ultimately priced the tools I wanted on Amazon for a good discount. Not like the old Sears Craftsman name and warranty mean much anymore anyway.
[+] [-] ghaff|6 years ago|reply
Sears in particular really didn't know what it wanted to be. It did clothes (including buying Lands' End). It did tools, It did appliances. But it wasn't a discounter like Walmart. (Which drove a lot of regional discounters out of business.)
In short, it didn't have a strategy and tried to focus on everything.
[+] [-] Mountain_Skies|6 years ago|reply
[+] [-] bluedino|6 years ago|reply
All your 'cheap' tools come from Harbor Freight
And the high-end is still Snap-on, MAC, SK, those kind of companies
So where does Sears fit in?
[+] [-] AtlasBarfed|6 years ago|reply
[+] [-] newbrict|6 years ago|reply
[+] [-] dantheman|6 years ago|reply
[+] [-] kup0|6 years ago|reply
https://www.wsj.com/articles/how-sears-lost-the-american-sho...
Outline here because I think it's semi-paywalled. The first time I got to it, it was fine (maybe because I googled it): https://outline.com/84tyGU
[+] [-] ranDOMscripts|6 years ago|reply
...And in other news, water is wet.
[0]https://www.nytimes.com/2017/08/11/business/the-incredible-s...
[+] [-] gefh|6 years ago|reply
[+] [-] RosanaAnaDana|6 years ago|reply
[+] [-] musicale|6 years ago|reply
Toys R Us seems to have met a similar fate of acquiring massive debt (in its case via a leveraged buyout rather than a merger) and then having all of the money sucked out, but I still hope it might return somehow.
[+] [-] etxm|6 years ago|reply
[1] - https://en.wikipedia.org/wiki/Sears_Catalog_Home
[+] [-] defterGoose|6 years ago|reply
[+] [-] griffinkelly|6 years ago|reply
[+] [-] exclusionzone|6 years ago|reply
[+] [-] neonate|6 years ago|reply