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The bankruptcy filing everyone saw coming finally arrived. Sears Holdings (NASDAQ: SHLD) announced early Monday morning it was seeking Chapter 11 protection and had arranged financing that would allow it to keep operating, at least through Christmas. The goal is to reorganize around a few hundred profitable stores that the company hopes will allow it to achieve the turnaround that has eluded the bigger business for nearly a decade.
While other businesses have reorganized and emerged successfully while under the protection of the bankruptcy courts, including retailers like Payless ShoeSource, True Religion, and Gymboree, don't expect the same of Sears. The key difference between it and these others that survived their brush with death is they still retained some brand value. Customers still want to shop their stores, and their brands have an enduring appeal to consumers.
Not so with Sears. Under the tutelage of CEO Eddie Lampert, whatever value was once there has been all but eliminated, stripped bare from Sears as it sold off or spun out almost every asset that could be monetized. Orchard Supply, Sears Hometown and Outlet, Lands' End, and Craftsman tools are all gone. What remains is a shell of the former titan.
Image source: Getty Images.
Slow descent into decay
Many call Sears the Amazon.com of its day, the place where consumers could shop for almost anything they needed, including flood, clothes, appliances, furniture -- even houses. Like the big-box stores of today, Sears sought to bypass the local general store with its catalogs that offered farmers and others a way to directly buy all that they needed.
But the change in consumer shopping habits brought on first by the rise of discounters like Walmart and Target, which made competing on price a prime strategy, and then by Amazon, which made shopping from home convenient, was too much for a retailer that would not or could not respond.
It was only because Sears had its vast legacy real estate holdings -- about 3,500 stores around the time Lampert's Kmart chain acquired Sears in 2004 -- that it was able to forestall for years what eventually occurred this week. Instead of investing in his stores, Lampert chose financial maneuvers to sustain the business, which often gave the appearance of health, but allowed the underpinnings -- selling goods -- to erode away. As a result, Sears was a slow-motion train wreck that survived longer than many suspected it could.
Although Lampert is gamely going to try to rebuild the facade of a viable retailer while in bankruptcy protection, it likely will crumble again.