- Sears‘ chairman, Eddie Lampert, has won a bankruptcy auction to keep the 126-year-old retailer from liquidating. Lampert’s hedge fund, ESL Investments, said last week that its bid of more than $5 billion would save up to 50,000 jobs and keep about 400 stores open.
- Since filing for bankruptcy in October, Sears has been facing a possible liquidation.
- The department store has been losing money and closing stores for years. Many employees and analysts blame Lampert for the retailer’s decline.
Sears has narrowly avoided liquidation.
Sears’ chairman, Eddie Lampert, won a bankruptcy action to keep the retailer from liquidating, according to a person familiar with the matter. Bloomberg was first to report about the bid’s acceptance early Wednesday morning. Lampert’s hedge fund, ESL Investments, said last week that its bid of more than $5 billion would save up to 50,000 jobs and keep about 400 stores open.
The bid still needs to be approved in bankruptcy court.
Sears has been battling with a possible liquidation since it filed for bankruptcy in October and Lampert stepped down as CEO.
"Over the last several years, we have worked hard to transform our business and unlock the value of our assets," Lampert said in a statement to the press at the time. "While we have made progress, the plan has yet to deliver the results we have desired, and addressing the Company's immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer."
Since then, American consumers have been lamenting the loss of what was at one point the world's largest store and considered to be an early innovator of the shopping landscape.
Keep scrolling to see the story of its downfall in photos:
Sears started off as a mail-order catalog company selling watches and jewelry in 1888. It became the largest catalog company in the United States after expanding its assortment.
In the 1920s, as catalog shopping started to fade out, Sears adapted to the changing times and opened stores. According to Investopedia, sales at its stores outpaced catalog sales by 1931.
Source: Investopedia
The company grew from being only a retailer to offering financial services, including setting up an insurance arm with Allstate and acquiring various financial brokerage firms.
It also began rolling out its own brands such as Craftsman, DieHard, and Kenmore.
Its dominance in the retail sector began to fade in the 1970s as lower-priced stores such as Target, Kmart, and Walmart gained momentum. By 1991, Walmart had taken Sears' place as the largest retailer in the country.
Source: Business Insider
Over the course of the 1990s, Sears started shedding its financial and insurance businesses and discontinued the catalog.
In 2003, Sears sold its credit-card business to Citigroup in order to focus exclusively on retail. The credit-card business had outgrown the core retail operation and accounted for 60% of its annual profits at the time.
Source: The New York Times
However, the chain was increasingly coming under pressure as shopping shifted online, and it failed to adapt.
In 2004, it announced that it would merge with low-cost retailer Kmart.
The deal was masterminded by Lampert, who was chairman of Kmart at the time and owned a 50% stake in its business through his ESL Investments hedge fund. He was also the largest shareholder in Sears at the time, with a 15% stake.
Lampert then became chairman of Sears Holdings, the combined company.
In 2004, BusinessWeek speculated that Lampert would become the next Warren Buffett.
In its first year as a combined company, sales rose.
Source: Investopedia
However, for the next nine years, they dropped.
In 2013, Lampert became CEO of Sears Holdings.
The company's revenue declined substantially from $36.2 billion in fiscal 2013 to $25.1 billion in fiscal 2015.
In 2016, 24/7 Wall St reported that Lampert was the most hated CEO in the US, based on ratings and employee satisfaction reviews from Glassdoor.
As sales continued to fall, Sears started to shut down stores, sell real estate, and spin off brands.
Lampert thought he could turn around both companies by cutting costs and selling the real estate where underperforming stores were located.
In interviews with Business Insider's Hayley Peterson in 2016, employees blamed Lampert for the downfall of the company.
They said that Lampert rarely spent time at its headquarters.
Lampert stopped investing in stores. "He refuses to put a dime in updating stores," one former vice president told Business Insider.
Stores were severely understaffed, with some operating on less than half of the employees they needed, workers said.
Instead, he banked on Shop Your Way, a rewards program that enabled frequent buyers to accumulate points for their purchases and turn them into coupons and discounts. This complicated program backfired as it created massive lines at checkouts and angered customers.
Its stores were left to crumble.
Rotting ceilings were spotted in stores Business Insider visited.
Suppliers canceled contracts ...
... which left many stores looking empty.
Several high-level executives left the company.
"There are so many people running for the door not just because the ship is sinking, but because the captain of the ship is screaming at them, blaming it on them, and telling them it's their fault," one former vice president told Business Insider in 2016.
Hundreds of stores closed. Between 2013 and this October, its store count dropped from 1,980 to 687, according to the company.
Source: Business Insider
Lampert kept the company afloat by bailing it out with billions of dollars of loans from his hedge fund ESL Investments.
In October 2018, the company announced it had filed for Chapter 11 bankruptcy and would close 142 stores before the end of the year.
Lampert stepped down as CEO of the company but stayed on as chairman of the board.
The remaining stores stayed open for the holiday season. In December, Sears Holdings reported positive same-store sales growth for Sears and Kmart during the third quarter, after several years of declining sales.
However, it saw revenue decline by millions of dollars. Total revenue was $2.74 billion during the quarter, down from $3.58 billion in the same period the year before. This decline was partly due to store closings.
In early December, Lampert and his hedge fund, ESL Investments, outlined a plan to buy up the rest of Sears for up to $4.6 billion in cash and stock.
In early January 2019, it was reported that Sears would ask a bankruptcy judge to liquidate the company after rejecting Lampert's bid, but in an unexpected twist, the judge gave Lampert a second chance.
The judge ruled that his bid would be assessed against competing parties' bids at an auction scheduled for Monday, January 14.
After two days of negotiation, Lampert won the bankruptcy auction to keep the retailer alive.
Lampert's hedge fund, ESL Investments, had said that its bid of more than $5 billion would save up to 50,000 jobs and keep about 400 stores open.