
Sears Hires Advisers to Prepare Bankruptcy Filing - Vaslo
https://www.wsj.com/articles/sears-hires-advisers-to-prepare-bankruptcy-filing-1539136189
======
tyingq
It is interesting how many fronts they failed on.

Sears Credit could have spawned something like Paypal. They were successful
with their Discover card, and the Sears card was often young people's first
credit card.

They were kings of catalog shopping, and had the logistics and product data to
have had a decent online business.

And, they had brand strength in several areas like Kenmore, Craftsman, Land's
End and DieHard Batteries. I know they licensed all that out, but way after
the brand had peaked.

~~~
joezydeco
This is the canonical eulogy for Sears, courtesy of Pastabagel@Metafilter:

[https://www.metafilter.com/62394/The-Record-Industrys-
Declin...](https://www.metafilter.com/62394/The-Record-Industrys-
Decline#1742245)

 _" By my estimates, Sears could have spent about $200 million in 1994-1996 to
develop and promote retailing and financial services online, and they'd be
reaping billions.

Sears could still be a huge American company today, instead of a historical
footnote."_

~~~
pkaye
But then again, where are all the early search engine companies now? Alta
Vista, Yahoo, Ask Jeeves, Inktomi, Lycos... Just because you are early in a
market doesn't mean you will succeed.

~~~
da_chicken
Yeah, but if you are early _and_ you have capital, you've got a major market
advantage. You'd have to seriously stumble somewhere in your execution, and
having capital makes that easier to fix more quickly while being early means
you're better able to drive and read the market. For a company like Sears
whose name was largely built on their mail order catalog business, the fact
that they'd die to competition from online retailers is pretty ironic.

~~~
joezydeco
They _gave away this market_ by killing the mail order business in the late
90s. That's the entire thesis of the link I posted.

Sure, Sears would have lost some ground to online retail at the start, but
with a massive warehouse and distribution network already in place they could
have made up the lost ground very very quickly.

~~~
eldavido
I feel the real missing ingredient here was the foresight required to
anticipate a lot of these changes looking forward.

It's something I've been trying to develop myself. Any idiot can look back and
say, gee, they could've done this, that, and the other thing, with benefit of
hindsight.

How do you become the sort of person who sees where things are going,
years/decades in advance?

~~~
Choc13
The Innovator’s Dilemma is a good read for more information on this topic. In
fact one of the examples/case studies focuses on Sears and how the were nearly
taken down by discount retailing.

The book can be found on Amazon here: [https://www.amazon.co.uk/Innovators-
Dilemma-Technologies-Man...](https://www.amazon.co.uk/Innovators-Dilemma-
Technologies-Management-Innovation/dp/1633691780)

------
protomyth
One of the hidden problems with Sears going under is that by and large they
had some really good auto repair shops. They charged a fair price and really
didn't try any funny stuff. They were the good "I don't know a mechanic in
this town" place to go.

~~~
intopieces
When did they stop having good auto repair shops? My experience in the past 5
years has been that the people who worked there seemed to be picking up a
wrench for the first time the day I rolled in.

~~~
protomyth
Took a car in two years ago and they did a good job. I get the feeling its
been a bit of a slow decline depending on where you are.

------
bruceb
(Eddie) Lampert rarely visits Sears Holdings headquarters, outside of
Chicago—some say only once a year, for the annual board meeting.
[https://www.vanityfair.com/news/2018/03/the-strange-
odyssey-...](https://www.vanityfair.com/news/2018/03/the-strange-odyssey-of-
hedge-fund-king-eddie-lampert-sears-kmart)

Company failing and he doesn't even show up.

~~~
hotsauceror
I don't think this is unintentional. His own hedge fund has bought several of
Sears' most valuable brands. But even more important, Sears has sold a lot of
its real estate to ESL or Seritage or whatever Lampert's holding company is.
I've read suggestions that he'll make out better in the long run by reselling
that valuable real estate than lifting a finger to save Sears' retail
operations. I'm not quite sure I see how buying large spaces in dying shopping
malls is a huge value proposition for buyers, but that's the explanation I've
read for why he's seemingly knowingly running Sears into the ground. He gets
valuable assets for pennies on the dollar.

~~~
bluGill
Sears has a large pension liability. If they go bankrupt the pension
obligations disappear. His hedge fund can open a new "I can't believe it isn't
Sears", except because the pension is gone it can make money where Sears
cannot doing otherwise the same thing.

Pensions in the US are only allowed to invest in the absolute worst returns
options, which is why companies rarely have them and are getting rid of them.
However you cannot get out from under your previous promises made 30 years ago
when it was possible to have get a good return - unless your company goes
bankrupt.

The pension thing is a tricky problem, the reason pensions can't just invest
in anything is when they could they invested in their own stocks - which means
a company going bankrupt just took retirement away form long term employees. I
knew someone as a kid who put in 30 years for a company that went under a year
after he retired taking away his retirement.

~~~
mrfredward
>If they go bankrupt the pension obligations disappear.

Not that simple. The PBGC
([https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...](https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation))
has had a lien on several of Sear's properties for a few years now, to cover
Sears's unfunded pension liabilities.

Here's an example: [https://www.reuters.com/article/us-sears-pensions/in-
kenmore...](https://www.reuters.com/article/us-sears-pensions/in-kenmore-sale-
sears-pension-liabilities-come-back-to-bite-idUSKCN1L70DI)

Now a worrisome note: the PBCG falls under the control of the treasury
secretary, Steve Mnuchin, who just happened to be Lampert's college roommate.
I can't see any evidence of wrongdoing here yet, but it's something to keep an
eye on. The whole deal with Lampert and Sears is a tangled mess that might
make for interesting reading when more of this ends up in a courtroom.

------
godzillabrennus
They died years ago. This is just the funeral.

~~~
mc32
It’s like one of those Garcia-Marquez stories. The facade is maintained long
after the thing died —the facade was no longer necessary but it continued due
to momentum.

~~~
howard941
Quite the contrary. The facade was required until the clock ran out on Title
11's two year fraudulent conveyance presumption.

------
walrus01
Telecom industry person here: About four years ago I was contacted by a real
estate industry person, purporting to represent Sears, that was looking to get
revenue from putting cellular carrier sites (other other monthly rental from
telecom-related things) on the roofs of Sears' big box retail stores. They had
a website marketing it and everything. I don't believe it ever went anywhere,
because the nationwide big-4 cellular carriers would much rather pay a mall
owner for a 15'x15' plot of land to put in a cabinet and monopole, than
sublease a rooftop from Sears.

~~~
selimthegrim
What do you mean by monopole?

~~~
riffic
[https://en.wikipedia.org/wiki/Monopole_antenna](https://en.wikipedia.org/wiki/Monopole_antenna)

~~~
walrus01
not really, no, that's for a type of antenna. I was referring to the structure
which supports the antennas, which is something like this:
[https://www.pinterest.com.au/pin/562950022151065454/](https://www.pinterest.com.au/pin/562950022151065454/)

------
poulsbohemian
Moments like this actually give me some hope. Perhaps younger generations will
use this as an example of how corporate America is no ones friend. They don’t
care about you as an employee, they don’t care about their customers, and they
don’t care about politics unless it gives them an unbridled revenue stream. So
much of what’s taught in B-schools is such a lot of malarky compared to real-
world capitalism, which has nothing to do with the simple ideas of building a
good product, containing your costs, etc. It’s all shenanigans and financial
engineering, to the benefit of the few in power, where executives are replaced
when they fall out of favor, rather than their obvious incompetence. As
pointed out here, Sears could have been something akin to the juggernaut that
is Amazon today - maybe even bigger. But that would have involved work, and
greed always opts for cheap and fast.

So, you want a lesson kids? If you aren’t freelancing, building your own
company, seeking ways to be part of the financial engineering games, then you
are really just one paycheque away from being out on the street. I’d like to
think that with enough recessions, with enough pump-and-dump, with enough
scheming, that eventually enough people will decide to create their own
businesses, and maybe we’ll see small businesses, small towns, and real
capitalism reborn.

~~~
throwaway456321
why is this comment grayed out?

"shenanigans and financial engineering, to the benefit of the few in power,
where executives are replaced when they fall out of favor, rather than their
obvious incompetence"

Right on the money!

~~~
poulsbohemian
It's ok, I've learned to just throw karma to the wind and speak my mind. Some
will upvote, many with downvote. I find it fascinating from a sociological
perspective which way the HN crowd will go on any given day. There are some
really insightful folks here with amazing backgrounds and a lot to share, but
there are also a lot of perspectives I can't quite put a finger on.

------
pastor_elm
What does this mean for their pension payouts? Too bad the retirees are too
old for a revolution. Liquidate all their holdings and payout to the
pensioners.

~~~
mattnewton
If only :/

------
samfisher83
Sears was Amazon before Amazon. He started by selling watches from mail order
catalogs and then selling more stuff, and then opening stores.

------
rossdavidh
So, does this have knockon effects for mall stores? Lots of malls with one
less anchor, after the ripple effects go through. I realize bankruptcy does
not always mean everything closes, but in this case I think a lot of it does
pretty soon. Many malls are already on the edge, I think this could be a
problem.

------
arbitrage
Better article from Forbes, that isn't behind a paywall

[https://www.forbes.com/sites/georgeschultze/2018/10/08/sad-s...](https://www.forbes.com/sites/georgeschultze/2018/10/08/sad-
sears-saga-stretches-on/)

CEO Lampert is a conman, and would be the only person to benefit from this
move. Sears shouldn't be given any more breaks, and should just die already.

~~~
joncrane
What is "vulture investing?"

~~~
brixon
A vulture investor buys up assets and financial instruments below cost from
distressed entities.

~~~
vidanay
See also "Chainsaw Al"

[https://en.wikipedia.org/wiki/Albert_J._Dunlap](https://en.wikipedia.org/wiki/Albert_J._Dunlap)

------
kirykl
a Sears fail anecdote: Tried to buy a vacuum once with a printed out Sears
gift card (card # only) and cashier refused, manager told me they should call
loss prevention just for me trying to use that. Brought up Sears website on my
phone, typed in the card #, and selected store pickup. Walked over to the
pickup area and left with the vacuum.

------
24gttghh
What do they usually do with all the assets of these companies when they go
bankrupt? Would stuff like all their appliance stock get put up in a fire-sale
for cheap? I need a new washing machine...

~~~
stephengillie
A liquidation company buys the assets and sells them - down to the shelves and
signs. That's why all the "Store Closing" signs are the same, because the same
liquidation company shuts down many companies.

~~~
darkarmani
A local bon-ton had just done something similar. i'm not sure if they were
bankrupt, but the store went out of business at the mall and EVERYTHING was
being sold for cheap. We got a $90 coffee table (reduced already) for $6 after
they took off like 90% and some other discount for that day.

~~~
stephengillie
Did they use the same Store Closing signs as your local Toys R Us?

------
village-idiot
Took longer than I expected, but unsurprising otherwise.

~~~
uptown
Next up ... JCP.

~~~
StreamBright
Please no, my favorite clothing store in the US

~~~
post_break
Not being snarky, but why? I'm curious why you shop there.

------
kaizendad
It's amazing, Sears CEO Lampert has done so much self-dealing -- turning Sears
assets into Sears cash + Sears debt, with the debt owned by Lampert's own
companies -- that he'd be the only beneficiary in a bankruptcy. There's so
little equity, other shareholders would be wiped out. It's hard to see how
this doesn't end in a massive lawsuit, and, hopefully, some kind of
consequences for rapacious capitalists.

cites: [https://www.usatoday.com/story/money/2017/03/22/sears-
holdin...](https://www.usatoday.com/story/money/2017/03/22/sears-holdings-ceo-
eddie-lampert/99487518/), [https://www.cnbc.com/2018/04/23/eddie-lamperts-
hedge-fund-es...](https://www.cnbc.com/2018/04/23/eddie-lamperts-hedge-fund-
esl-proposes-to-buy-kenmore-brand-sears-real-estate.html)

------
anon4lol
I used to love to go to sears. As a kid I would spend hours thumbing through
the Sears catalog, and circle Christmas gifts to give hints to my parents. At
one point most of the appliances and tools in my house were Sears brands.

Unfortunately, reading some of the comments to a story gives me headache.
Especially the "corporations are evil" type comments. Sears was killed by two
factors: 1) Lampert's self-dealing and attempt to extract personally enrich
himself, and 2) optimizing everything to extract as much cash as possible,
from every facet of the business.

When I was younger, there was a classic business case presented in an MBA
program regarding frozen pizzas. A food company sold frozen pizzas that was
great and had a very strong customer loyalty. In search of more revenue, an
MBA calculated the cost savings if they reduced the number of pepperoni.
Unsurprisingly, they made more money and no one complained. Bonuses were
handed out. Year after year, they started to "optimize" the pizza. After
several years of this, sales tanked. Customers stopped buying. They hired
consultants who performed focus groups and they found out that customers
didn't want a cheese pizza with a few toppings. They never fully recovered
revenue back to the original levels even after trying to win back customers.
Once they broke the customer's inertia, customers started exploring other
options and found better ones. The key take away is: don't be myopic and only
focus exclusively on short term gain because you may run your customers off.

I have seen this pattern repeated over and over. Amazon is the now biggest
example. Every interaction I have with Amazon is getting more onerous. It used
to be I would go online, search amazon and order. Now the product search
results are festooned with ads, sponsored products, and the product that I
want at higher prices, while the lower priced products are hidden. They
arbitrage postage. New ads on prime video. I can go on and on. Eventually
people aren't going to take it anymore, and when they do they will find
better, cheaper options. I know I have.

This happened at Sears. Every time I interacted with sears it was less
enjoyable. The products became cheaper and lower quality. Recently, I wanted
to purchase an olympic weight set. Heavy cast iron weights. Sears used to have
home a large selection gym equipment. It is one of places where someone will
go in to buy a barbell, and will return for more products like a curl bar,
more weights, and pick up a few other items while you were there. Nope, they
had determined it was more profitable to become a market place and take a
commission and not hold inventory. They optimized the inventory to only hold
items that sell well or have high mark-ups.

Being a cynic, I really don't think Lampert cares. Although I don't think BK
was the plan all along, he is obviously using it as a financial engineering
tactic to shed obligations while he owns all the real estate. His self-dealing
was so bad a number of investors were threatening lawsuits a few years ago.
Ultimately, he will kill the company and still walk away with a dump truck
full of money.

------
amyjess
What kinds of regulation can the government pass to make it illegal for
vulture capitalists to raid companies like this?

~~~
AnimalMuppet
Why should it be illegal? If Sears has more value being shut down than kept
running, why shouldn't it be shut down?

~~~
amyjess
Because this kind of raiding is harmful to society.

~~~
mikestew
How is it harmful? Sears was an empty shell long before the raiders showed up.
They'd pissed away brand goodwill for years. 1993, they shut down their
catalog operation. A year later, Amazon is founded. That long air-horn sound?
Yeah, that's the boat you just missed, Sears. I could go on, but for all his
faults Lampert is an unpleasant symptom of an untreated disease Sears has had
for a while, not the disease itself.

~~~
philjohn
Because it allows you to get out of paying things like pension liabilities, or
suppliers.

~~~
mikestew
Sears was headed toward bankruptcy with or without private equity. My question
is specifically addressed at the harm of private equity picking the bones of
what is already some pretty sorry looking roadkill. Those pensions and
suppliers weren't going to get paid no matter who owned Sears, not at the rate
they were going before Lampert showed up.

------
phakding
I have many friends who work for Sears corporate. Listening to them, it seemed
like Lampert bet his company on his libertarian ideology. Turned out Ayn
Randian ideology doesn't work in real life.

~~~
howard941
Your friends shouldn't shed any tears for him, his proprietary entities will
make out just fine. Better than just fine.

~~~
phakding
They are shedding tears for themselves. Most of them left a while back, bit
some are still sticking back.

~~~
howard941
For what little it's worth I send good vibes their way and I hope what they've
lost comes back to them 3x.

