Published: Mon, October 15, 2018
Money | By Armando Alvarado

Sears, the store that changed America, declares bankruptcy

Sears, the store that changed America, declares bankruptcy

The filing in federal bankruptcy court in NY came in the early hours of Monday morning.

Early Monday morning, Sears announced it had filed for Chapter 11 bankruptcy - which would allow it to reorganize and possibly reemerge from bankruptcy with some part of the business intact - and received commitments for $300 million in debtor-in-possession financing to carry through the bankruptcy period while it restructures its debt and reorganizes its business. But it wasn't able to keep up with shifting consumer habits as online rivals siphoned off shoppers, and turnaround efforts were hobbled by mountains of debt.

Neil Saunders, managing director of GlobalData Retail, said Sears' troubles stretched back to the 1980s when it became "too diversified and lost the deftness that had once made it the world's largest and most innovative retailer".

ESL said in April it would be open to buying some of the company's assets and urged the department store to put the businesses on the block.

Sears and Kmart merged to form Sears Holdings in 2005, when they had 3,500 U.S. stores between them. The company will now be run by three of the company's top executives.

In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears key assets like Kenmore through his hedge fund as a $134 million debt repayment comes due on Monday.

Sears revealed Tuesday night that investor Bruce Berkowitz of Fairholme Capital Management dumped 142,000 shares of Sears in the last few days, for only 59 cents to 65 cents a share. According to The Journal, Sears' controversial CEO Eddie Lampert, who has come to the retailer's rescue in the past with billions of dollars worth of loans through his hedge fund ESL Investments, is not bailing it out this time.

"I feel upset because I like Sears", says Mark Vesei, who signed up for a store credit card.

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Since 2012, Sears losses have topped $10 billion. Mr Lampert personally owns 31% of the company's shares.

But while retailers typically file for bankruptcy with the intention of staying in business, many end up going bust after filing. ESL Investments is also Sears' largest stockholder and creditor.

The company said employees' wages and benefits will continue to be paid and the firm is working with its vendors to ensure shelves remain stocked. Maybe this will let them turn things around, but it unfortunately looks more like a last stand before annihilation.

Sears merged with Kmart in 2004, at which point the holding company had more than 3,500 locations. But it struggled to get more people through the doors or to shop online.

In July Sears closed its last store in Chicago, once its hometown.

With the writing on the wall that a bankruptcy was imminent, suppliers demanded Sears pay cash up front for the items in its stores, putting it at an even greater competitive disadvantage with other retailers.

At its peak in the 1960s, Sears sold everything from toys to auto parts to mail-order homes, and was a key tenant in nearly every big mall across the United States.

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