WASHINGTON. It’s been a topsy-turvy Tuesday for onetime retail giant Sears. The company filed for bankruptcy in October 2018. Today, the ailing retailer rejected a last-minute buyout bid by Eddie Lampert, its chairman, in conjunction with his hedge fund, ESL Investments.
Sears rejects Lampert’s bid
But the company’s bankruptcy advisors rejected as inadequate Lampert’s $4.4 billion bid to save Sears and over 50,000 jobs. Ultimately, Sears did not believe that Lampert’s buyout proposal would adequately cover the company’s already heavy indebtedness to vendors and bankruptcy advisors. It’s an issue that has dogged the company for years. As a result of this decision, the company promptly began to prepare for liquidation.
Lampert and ESL win a court reprieve
However, Lampert and ESL promptly protested the decision to the bankruptcy court. As a result, a bankruptcy judge today decided to give Lampert an opportunity to improve his offer. CNBC briefly outlined the terms in an online article Tuesday afternoon.
“Lampert’s hedge fund, ESL Investments, will be required to pay a $120 million deposit by 4:00 p.m. Wednesday. Sears will hold an auction Jan. 14, when it will compare Lampert’s offer against liquidators.”
In an earlier article today, CNBC noted that even in liquidation, parts of iconic retailer’s onetime empire – which also included the struggling K-Mart stores – might yet survive.
“A liquidation could still salvage pieces of the storied retailer, like its home services business. Still, it marks the end of an era for the company that started more than a century ago as Sears, Roebuck & Co., and was once the nation’s largest retailer. Its fall from grace saw it swing from being the ‘first everything store’ to a business that couldn’t compete when ‘everything’ was found online after Amazon arrived.
“It will be what many deem the ultimate proof of failure in Lampert’s grand plan to fortify two struggling retailers, Sears and Kmart, by combining them in 2005. The combined companies became victim of savvier competition, changing shopping habits and, many have argued, poor management.”
Lampert never understood retail — only the real estate beneath the stores
Ultimately, Lampert never really grasped the retail model. Lampert and ESL Investments may only have been interested in Sears’ extremely valuable real estate holdings from the get-go. His half-hearted marketing efforts indicated little interest in operating or growing the stores.
Lampert’s missed the point of competitive retail. He failed to attract customers by failing to spruce up and modernize Sears’ and K-Mart’s dismally gloomy and unappealing stores. Add to this Lampert’s slow and halting response to the Amazon and Walmart juggernaut. The result: the onetime king of American retailers found itself on the defensive.
Worse, Sears lacked the resources to counterattack. With virtually no funds to update its stores or its business model, dozens and dozens of failing stores closed their doors forever.
Sears and K-Mart: On a long, slow ride either to oblivion or irrelevance
Not surprisingly, the company’s last profitable year was 2010. It’s been downhill ever since. Arguably, Lampert only made the situation by choosing to sell the company’s iconic brands. He shed Kenmore appliances and Craftsman tools, ending their exclusivity at Sears and K-Mart locations.
Sears’ and Lampert’s last-minute reprieve will last a week. Beyond that, it’s unclear as to whether this once dominant retail giant will live – with a much smaller footprint – or die in liquidation after January 14.
Whatever the case, the denouement will mark the inglorious fadeout of a legendary retail icon, along with its hapless retail partner, K-Mart. That cut-price retailer’s once-ubiquitous blue-light specials may also fade to black, putting an effective end to a once thriving and exciting retail environment that’s been nearly obliterated by the likes of Amazon Prime.
— Headline image: One of struggling retailer Sears’ experimental specialty store concepts.
Ironically, such concepts marked the beginning of its long decline and current bankruptcy.
(Public domain photo via Wikipedia entry on Sears)