“Sears, America’s Store,” also known as Sears Holdings, after a 125-year run as one of America’s leading retailers, filed for bankruptcy protection October 15th after an extended number of years of barely remaining solvent. The company survived this long as a result of having billions of dollars of its CEO’s own money with which to maneuver financially. Eddie Lampert, the CEO of Sears for the past five years, will step down from his position as CEO, effective immediately, but will continue as Sears’ chairman of the board.
Listing $11.3 billion in liabilities and $7 billion in assets, Sears Holdings announced that it had appointed Mohsin Meghji, managing partner of M-III Partners, as its chief restructuring officer. The bankruptcy will result in the closing of 142 stores around the end of 2018, with sales to liquidate inventory and other assets to begin shortly after the bankruptcy filing. Sears has 68, 000 employees and approximately 700 stores, which have often been under-supplied as a result of product vendors who lost their trust in the company as a viable retailer. Many of these stores have never been visited by younger shoppers, who don’t consider the retailer to be an option for their retail needs.
More than ten years ago, Lampert merged Sears and Kmart, both which were struggling, with the hope that the combination of two weak entities would create one formidable competitor on the discount retail market. However, Sears’ debt continued to rise more than its profits as its new CEO failed to attract former and new customers, much more comfortable shopping online and purchasing products from Amazon and similar entities.
Lampert has a controlling ownership stake in Sears personally holding about 31 percent of its shares outstanding. His hedge fund ESL Investments owns about 19 percent. “ESL invested time and money in Sears because we believe the company has a future,” Mr. Lampert announced in a public statement made a few weeks ago. Thus, Sears also announced that ESL is negotiating a $300 million debtor-in-possession loan to currently sustain it, which is in addition to $300 million it has secured from investment banks.
An unfortunate but not unexpected circumstance is that the company’s vendors have significantly limited the number of products they will provide on credit, making it more difficult for Sears to compete during the vital holiday shopping season.
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