
Sears files for bankruptcy after years of turmoil - stygiansonic
https://www.washingtonpost.com/business/2018/10/15/sears-nears-bankruptcy-after-years-turmoil/
======
drfuchs
Sears started as a mail-order company in 1892, with a catalog that quickly
grew to more than 500 pages. It came in the mail yearly, and rural America
quickly came to depend on it. It’s hard to convey what a huge success Sears
was; its 1906 IPO (the first one ever handled by Goldman Sachs) qualifies it
retrospectively as way beyond a Unicorn, as they _raised_ more than $1 billion
in 2018 dollars.

They didn’t open their first brick-and-mortar store until 1925, but the
catalog operation was still going strong for decades after that. However, they
mis-judged the future, and shut it down in 1993. Amazon was founded in 1994.
Sears had all the logistical knowledge of how to sell and deliver billions of
dollars of consumer products at scale; they should have been Amazon, but
pivoted away at exactly the wrong moment.

~~~
samatman
More than that, Sears had Prodigy, an early and very successful online
service.

They had all the pieces in place and still dropped the ball.

~~~
commandar
They also launched and owned Discover up until 1993, so they even had in-house
payment processing.

------
sschueller
"More important, Lampert personally lent billions to Sears Kmart, increasing
corporate debt. As in-store sales lagged, Sears sold off major assets like
Craftsman brand tools and Land’s End outdoor equipment to service the loans.
Lampert also split ownership of 266 Sears and Kmart buildings into a real
estate investment vehicle called Seritage. Last year, Sears and Kmart stores
paid $200 million in rent on these properties they once owned, eating up
operating revenue.

As Sears closes hundreds of stores and considers bankruptcy, Lampert will
likely come out ahead. He enjoyed fees from all the lending to Sears, and
he’ll recoup more money in any restructuring, even if Sears has to sell off
inventory to do it. As a shareholder of Seritage, Lampert’s hedge funds can
profit from higher rents charged to new retail outlets that move into the
shuttered Sears locations." [1]

[1] [https://newrepublic.com/article/145813/cause-consequences-
re...](https://newrepublic.com/article/145813/cause-consequences-retail-
apocalypse)

~~~
emiliobumachar
I wonder to what extent can Sears' creditors go after Seritage.

It can't be as simple an algorithm as:

1\. Buy a company

2\. Spin off major assets into another company

3\. Have the original take debt and pay the money to the spinoff

4\. Bankrupt the original, but keep the healthy spinoff without paying any of
the debt

5\. Profit!

... can it?

~~~
NeedMoreTea
Why? It's a model that's worked successfully for decades, though you forgot 1a
Have the company take on debt to pay for the takeover.

It's also ridiculously destructive and abusive to all except the asset
stripper.

~~~
i_feel_great
Why do others hang on when they see this coming, if they stand to lose?

~~~
parrellel
Rampant bullshitting.

------
Urgo
"filed for bankruptcy ahead of a $134 million debt payment due Monday"

wow

"The company has roughly $5.6 billion in outstanding debt"

wow!

That got me to google. As it turns out, only 18 out of the 500 s&p 500
companies don't have ant dept. That is crazy to think about.

[https://www.retirebeforedad.com/debt-free-
sp-500-companies/](https://www.retirebeforedad.com/debt-free-
sp-500-companies/)

~~~
mikekchar
Companies without debt are considered to be inefficient. The whole idea of a
company is that if I have $100 to invest, I can either lend it to someone else
and get interest, or I can build something and get a profit for my effort. As
a company, if you can't make more money from your $100 than you could get from
lending it to someone, then you shouldn't be running a company -- you should
be lending your money to someone else.

If you can make more money running your business than lending money, then you
can _also_ make more money than it would cost to borrow money. If you are
making 10% on your $100 and someone offers you another $100 for 5%, then it's
a pretty good deal if you can expand your business. Just to make it clear, 10%
on $100 is $10 and 5% on $100 is $5 dollars. So by borrowing, you expand your
business and make $15 instead of $10 -- increasing your profits by 50%.

Obviously, I chose easy numbers to make the math obvious, but generally it
works. The thing you need to ask yourself before you borrow money is, "What
are the chances that I can make that I can expand my business with that money"
and "What are the risks". But generally speaking, healthy companies can
increase profits if people keep offering them more money to work with. There
are a few exceptions that have so much cash that they don't know what to do
with it. Believe it or not, that is considered to be a big problem.

~~~
bduerst
Yep, leveraging debt is considered a financial tool, not a malaise. Corporate
accounting is very different than a personal bank account.

Even companies with large cash reserves will take out loans when the interest
rates are less than the internal rate of return of spending that loan. Most
people take out loans for personal things, not increasing their own personal
rate of return.

------
kposehn
I managed to get my craftsman table saw picked up from Sears (via Shop Your
Way) a scant 48 hours before they declared. I have no doubt my local store
will be closed and I expect the killer deals via Shop Your Way will be gone
shortly.

I’m genuinely saddened for the people at my local sears that are left. They
always were kind.

They’ll be looking for jobs as fast as they can I expect. I hope they get
them.

------
newnewpdro
It's incredible that it took until 2018 for this to to arrive.

Over a decade ago I was frustrated with the sharp decline in Craftsman's tool
quality. At one point I had exchanged a malfunctioning .5" drive rachet using
their famous lifetime warranty, only to have the noticably inferior
replacement start malfunctioning months later. It was already clear to me back
then Sears was done.

------
nabaraz
Here is a good timeline on Sears.

[https://s.thestreet.com/files/tsc/v2008/photos/contrib/uploa...](https://s.thestreet.com/files/tsc/v2008/photos/contrib/uploads/107b974c-011b-11e8-9c95-0f7dafbe68a7.png)

------
parrellel
Ah, like Toys'R'Us before it, the leveraged buyout destroys another company.

Sometimes, I wonder what might have been if Sears had never gotten out of the
mail order business, and had adapted reasonably to the advent of the Internet.
I like to imagine they wouldn't have been as disgusting as Amazon.

~~~
bluedino
Sears had been dying for a long time, and they got out of the mail order
business because they were losing a ton of money on it.

~~~
parrellel
Does that contradict anything I said?

------
nimbius
unrelated, but sears has had a lasting impact on american life in some of the
strangest ways. Im an automotive engine mechanic, and to this day I still see
old cars with "sears" style 'advanced' tire balancing.

This was a service they offered back in the 90's and were subsequently
litigated for it in some cases as they hadnt disclosed the full operational
process to customers before the work was agreed upon. Basically a tire
alignment at Sears also included wear leveling. Sears would pull your tires
off, spin them in a special laser mapping machine on the wheel, and grind down
high spots in the tire to "balance" it. this worked to remove flat spots in
the tires but the technology could actually increase the chance of a bubble or
blowout in certain conditions.

Then theres Craftsman tools. Worthless garbage from 2000 onward, but if you
managed to find yourself a set of genuine Craftsman sockets or wrenches from
the good old days then you're officially the dreamiest grease monkey in the
shop. These wrenches were practically strong enough to tear the hinges off St.
Peters gates. They were the gold-standard that settled every east german/west
german tool argument from an old timer.

------
kup0
Even 5-10 years ago both our Sears and KMart stores in the area were very run-
down, poorly lit, with really no upkeep at all. Both our family and someone
else's we know got really screwed on new sets of tires from Sears Auto that
were faulty and that they did not want to fix. The service was terrible.

Every now and then you could find an okay product at a decent price in KMart,
but the writing has been on the wall for the longest time. Now both of these
stores are gone from our area.

I can remember how different these places were when I was a kid/teen, though,
and interesting to watch, as the person quoted in the article says a "slowest
train-wreck" happen to what used to be popular brands (at least Sears, not
sure if KMart really had the same status or not)

------
janvdberg
This reads rather similar to a famous Dutch warehouse's demise:
[https://en.wikipedia.org/wiki/V%26D#Bankruptcy](https://en.wikipedia.org/wiki/V%26D#Bankruptcy)

------
the_clarence
What happen to their shares? Should I sell them? Can I sell them? Am I
screwed?

~~~
nabaraz
Why are you still holding them?

To your question, Shares will be delisted to pink sheet under $SHLDQ.

~~~
the_clarence
What does that mean? I just read the news so I'm not sure about my options.
Who would buy them?

~~~
avar
If you don't already know the answers to these questions you should not be
taking the high risk of investing in individual stocks.

But yes, you're screwed. In general you _might_ get some money back if the
assets they can sell on a firesale exceed the debts, but that'll be pennies on
the dollar.

But if the company had more debts than assets you've lost your money, unless
you're among the first in line for debt payout, but that'll go to "innocent
bystanders" like the suppliers of Sears first, not investors who just made a
bad investment decision.

~~~
the_clarence
Meh. I'm investing peanuts and it looks like I'm going to learn something
which I would have completely ignored if I had not bought these stocks.

~~~
drdeadringer
What lead you to buy Sears stock in the first place? Was Sears a seemingly
viable concern when you bought in?

~~~
the_clarence
It was the cheapest stock. Been buying small amounts of cheap stocks

------
netcan
I realize that this is hard and disruptive to people who work for Sears. But,
isn't corporate churn an important thing?

------
unstuckdev
Heading down to the Sears Outlet to buy a scratched but perfectly functional
version of the company for 90% off.

------
village-idiot
In how many malls is Sears the remaining anchor store? This is going to be
painful for suburban America.

~~~
AnimalMuppet
Sears stores have become really depressing places. There's very few workers
and very few customers, and the workers have no energy or enthusiasm. There's
no _life_ in the place. So if a mall has a Sears as the one anchor store, the
mall is already in trouble, because Sears isn't pulling its weight as an
anchor store.

------
RcouF1uZ4gsC
From an old comment in [https://www.metafilter.com/62394/The-Record-Industrys-
Declin...](https://www.metafilter.com/62394/The-Record-Industrys-
Decline#1742245) previously referenced by
[https://news.ycombinator.com/item?id=13135620](https://news.ycombinator.com/item?id=13135620)
just a reminder of what Sears could have been if they had not taken the short
sited decision in the early 90's.

Sears was started in the 1890's as a mail order business to compete against
local general stores (think of all those westerns with "General Store" on one
of the buildings - they were Sears competition). The guys Sears worked on
railroads, and he saw all the middlemen tacking on markup as products moved
west in the distribution chain until they go to the stores.

So he started a catalog, the famous Sears catalog in 1893. It was 300 pages,
and had everything. Now think about this for a second. In 1893, you had a mail
order catalog that sold pretty much everything that was for sale in 1893 -
machinery, bikes, toys, dry goods, etc. Does this sound like another business
you know?

So every year the catalog comes out, and after a few decades it becomes an
American institution. For much of the population, the Sears catalog includes a
decent quality, low cost version of every mass market nonperishable consumer
product in the United States that wasn't a car (they did sell those at one
point very early on. They also sold mobile homes too, up to the 1940's).

You could pick anything from the catalog, mail in your order with a check, and
in a few days/weeks you'd get it. If you didn't like it, for any reason, Sears
had a "satisfaction guaranteed" policy that you could return it at anytime for
a full refund.

Now pay attention, because here's where it gets good.

In 1931, Sears starts an insurance company - Allstate. It buys financial
investment firm Dean Witter and real estate broker Coldwell Banker in 1981. In
1984 it starts a joint venture with IBM called Prodigy, an online computer
service, sort of a prototype AOL. In 1985, Sears launches a new major credit
card, the Discover card. For the next eight years, the only credit card you
can use at Sears is Discover.

At this time, the early 80's Sears is the largest retailer in the U.S.

By 1993, the 100th anniversary of the Sears Catalog, Sears had built up
considerable goodwill in the mind of consumers. They weren't the lowest price,
but they had what you needed at good prices and the service was second to
none. They had real estate, insurance, financial planning, and all at good
prices with top customer service.

This is 1993. In quite possibly the greatest example of corporate
shortsightedness, Sears shut down it's mail-order business in a cost cutting
measure. It spins off Allstate that same year, and soon dumps Dean Witter and
Coldwell Banker.

In 1993, Sears had the most extensive and sophisticated mail-order retail
operation on the planet and they closed it.

Two years later, Amazon.com launched, and was soon selling everything that
sears sold through it's catalog. By the late-90's Walmart's push of low-cost
China imports killed Sears retailing. Online banking takes off. Credit card
use surges as mail order and retail purchases are shifted online.

Sears had its own computer network in 1993. They had access to IBM, they
should have understood the power of the internet. All they had to do was shift
the catalog online instead of killing it off, promising in store returns and
the same Sears satisfaction guaranteed. Discover could have been the credit
card of choice for security and protection online. Dean Witter could have been
what Schwab, E-Trade and Ameritrade became. Back in the mid-late 90s when many
people were hesitant to use credit cards online, Sears could have been a
familiar face online.

Sears could have used the Catalog to create searscatalog.com or wishbook.com
and owned online retailing, owned amazon's business, owned online brokerage
and banking, but they blew their chances to save a few bucks in 1993. They
could have made huge profits in the early 2000s real estate boom by leveraging
that success with their real estate arm (imagine if Amazon sold houses).

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.

