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For Some Big-Box Retailers, it’s Time to Move On


Hedge fund expert former Sears CEO Eddie Lampert recently convinced a bankruptcy court to have his company, ESL Investments, buy Sears Holdings (which includes Kmart) out of bankruptcy for $5.2 billion. Various reports said ESL’s new affiliate, Transform Holdco LLC, will manage 223 Sears and 202 Kmart stores, along with Kenmore, DieHard and Craftsman brands, Sears Home Services and Sears Auto Centers, among other assets.

The deal includes $400 million in credit to pay past debts, open smaller stores, get a new marketing program going, etc. The CEO for Transform Holdco, as of this writing, has yet to be hired. Yet we all know that no matter who the CEO is, the real power lies in the hands of Lampert.

But Lampert’s shadow and control still looms over Sears, so what’s the difference between the pre-bankruptcy Sears Holdings and newly-emerged Transform Holdco, if he is still involved?

According to reports, arguments made by ESL Investments said that this was the only way to save the jobs of up to 45,000 employees and Sears, the 133-year-old chain. My opinion is that the fate of those jobs, Sears and Kmart, ended a few years ago. From 2012 to 2018, Sears Holdings hemorrhaged losses in the billions of dollars. Management couldn’t develop a viable plan to turn the situation around and reinvent it for today’s consumers.

Sears was on the decline when Sears Holdings was formed in 2004, even as major appliances and consumer technology were two of Sears’ biggest categories. In the early 2000s Sears was the number one retailer of major appliances, thanks to its Kenmore brand, brand selection, experienced sales and installation teams, and was a market share leader in consumer technology.

Of course, the rise of Amazon and online retailing took its toll, while Home Depot and Lowe’s focus on appliances, and Best Buy and Walmart’s expertise in technology eroded Sears’ market share. Lampert and the various Sears Holdings’ management teams over the past decade could not respond effectively.

In the U.S., often iconic retailers in business for well over a century have closed their doors. Remember Sears’ arch rival, Montgomery Ward? It was also a top retailer in major appliances and technology and was in business from 1872 until 2001. Wards’ closed because it couldn’t keep up with changing consumer tastes.

The same happened to other formerly successful electronics and electronics/appliance chains over the years, such as Circuit City, hhgregg, Highland Superstores, Silo, Fretter, Tweeter, Nobody Beats the Wiz, Tops Appliance and many more. Many went public and stumbled, some died before and after the emergence of online retailing. The reasons often include overexpansion and the loss of savvy management who knew the business.

In my experience, once a retailer slips, they usually go out of business after a few years. The only chain that was on that track and was able to turn it around and save itself, revive and continue to be a major factor in this industry is Best Buy, under the direction of Hubert Joly.

Doing a walk-through of a store undergoing liquidation is never pleasant, but I did go to my local Sears at the Volusia Mall in Daytona Beach the other day. In December it was announced it would close in March. As The Daytona Beach News Journal reported, it was one of the original anchors of the Mall when it opened in 1975 and had “a presence in downtown Daytona Beach for decades.”

By the time I visited there was no longer a technology department at the Volusia Mall location. In major appliances there were mostly Kenmore products and some Samsung, GE and Frigidaire models. Maybe, like the Great Recession brought on by hedge funds and Wall Street, the bankruptcy court thought Sears is “too big to fail.” While I don’t want to see companies – suppliers, distributors or retailers – go out of business with many hardworking employees losing their jobs, I think its time to move on. 

Steve Smith

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