
Sears Hasn’t Fared Better After Bankruptcy - howard941
https://www.wsj.com/articles/sears-hasnt-fared-better-after-bankruptcy-as-another-100-stores-will-soon-close-11570959000?mod=rsswn
======
bluedino
Our Sears store is finally closing it's doors this month. It took long enough.

20 years ago I worked there, selling Packard Bell and Macintosh computers, as
well as vaccums. Who decided those departments should be merged, I don't know.
Once in a while I'd sub at a smaller store about 45 minutes away, and cameras
got thrown into the mix.

I always liked the Sears Auto Center for tires, service, and Diehard
batteries. Craftsman hand tools were decent until the mid-2000's when they
started changing warranty policies.

The power tools and lawn equipment were never really any good. If you buy a
'Craftsman' mower, you're getting the same Chinese-engined lawnmower that you
buy at the same price point at any other store. Just like any other product
these days.

They used to have an entire part of the store dedicated to flat-screen TV's.
As they cheapened, the area got smaller and smaller, until it was 4-5 sad TV's
hanging on a wall. Just this last year they decided to fill that part of the
store with mattresses.

I noticed the store filling up with Craftsman, Kenmore, and other Sears-
branded junk. Just low end stuff like cheap shoes, plastic utensils, and pots
and pans. I figured distributors weren't willing to give Sears enough credit
to stock the stores with stuff of any value.

The store itself hasn't been kept up in forever. Most of the ceiling tiles are
stained from leaks. the carpets are probably as old as I am, everything is
broken, and it doesn't even feel like they turn the heat on in the winter.

~~~
taurath
The department stores have the same sort of death spiral as malls - the
quality drops, people stop going in, the quality drops again.

I’ve never in my life felt going to a department store I’d be met by someone
knowledgeable in an area other than makeup.

One thing I’d have loved to see - an emphasis on customization and tailoring.
Almost everyone could use a little custom tailoring for pants, blouses and
shirts, and it does not scale online well at all as you need to be in person
to get measured. If you like a shirt and it’s ill fitting, pay $15/20 for a
cheap hem job and walk out feeling like a million bucks.

~~~
bobthepanda
I don't know if they still do this, but Uniqlo offered in store tailoring for
their jeans when I went to one of their massive NYC stores years ago.

~~~
coredog64
Yes, they still do. IIRC, alterations like length are free.

------
zipwitch
Sears biggest problem is that the now-former CEO had been looting it for
years.

[https://www.reuters.com/article/us-sears-lawsuit/sears-
sues-...](https://www.reuters.com/article/us-sears-lawsuit/sears-sues-lampert-
claiming-he-looted-assets-and-drove-it-into-bankruptcy-idUSKCN1RU1V3)

~~~
drawkbox
The private equity leveraged buyout play by the cash and value extractors.

Careful leaving too much cash or value creation lying around, the extractors
will come seeking it, and take it if you aren't vigilant.

Sears lost that battle long ago. In an alternate dimension, a value creator is
in charge of Sears decades ago, and there is a nice competition of Amazon,
Walmart and Sears in that place, making pricing even better for consumers. In
our current dimension, Sears management got too comfortable counting the
beans.

~~~
Scoundreller
My guess is that they tried to make money on it. Failed. And tried to minimize
their losses.

~~~
drawkbox
That and risk taking was muted because they were scared to take a big hit.
Typical HBS MBA-itis not risking enough in R&D and new markets, too
comfortable counting the money in the current market while the road heads
towards a cliff.

Sears knew a major change was happening and did not become a top player in
that change, it was inevitable.

Amazon will never get lazy like that, Amazon is a pure R&D machine.

~~~
wolco
I feel like Amazon is getting lazy on the customer side of retail products.
The experience has been eroding for me. They are usually not the cheapest
quickiest or best quality. The return policy with 3rd party vendors and the
product switching reminds me of sears in the early 2000s.

Name one novel thing Amazon has done for those buying products over the last
few years?

~~~
drawkbox
Amazon's focus has really been on faster shipping and same day, more on
fulfillment. I am sure they will be working on product quality eventually,
right now that is up to the user. They are also heavily pushing Alexa/Echo.
They'll no doubt be first to drone delivery.

Amazon though makes most of their money from AWS, they found a way to reap ROI
on R&D for their own supply/services chain. That is what really nailed it,
this only came from an engineering focused research and development push that
reinvested every dollar for a long time back into it, breaking all the rules
of showing profits for a long time.

Walmart also is very good at supply chain and fulfillment. They have always
been early to technology improvements there including pushing suppliers to
EDIINT/AS2 and digital purchase orders and invoicing, up until 2003 everything
in retail ordering was still really fax or e-mail orders. They were doing RFID
in warehouses really early on. They got tons of improvements early on Target
and other retailers moving on this early. Walmart Labs knows you have to
reinvest in research and development.

Sears, without a competitor for a long time, and a lack of product/engineering
driven leadership, got fat, happy and nappy, eventually was decades behind
before they woke up.

~~~
wolco
Shipping for non-prime users is my biggest issue. They always wait until the
last poasible date to ship. Weeks / months for some products. I'm outside of
the US so that may be a factor.

Feels like most of their focus went to aws.

------
claudeganon
Grubstakers had a good deep-dive on how Lampert drove Sears into the ground
with his half-cocked, self-enriching schemes. My favorite part was the
mandatory internal social network he implemented, where he spent hours arguing
with employees through sock-puppet accounts:

[https://soundcloud.com/grubstakers/episode-105-eddie-
lampert...](https://soundcloud.com/grubstakers/episode-105-eddie-lampert-
searsk-mart)

~~~
folkhack
God this is outrageous - it's just a portrait of people who should never be in
the powerful positions (that they don't deserve) screwing over thousands of
people. They withheld wages, canceled insurance, etc. ... It's just disgusting
and these folks should be ashamed for doing this.

Listen to the podcast - it's outrageous.

------
AtlasBarfed
The bad assumption of this article is that the goal of Kmart/Sears in
bankruptcy is to get out of bankruptcy. That is completely false.

The entire goal of the Sears/KMart management is to siphon shareholder value
and money from the parent company into shadow companies that the executive
team owns, while saddling the main company with increasing debt and passing it
through various stages of bankruptcy. At each stage the maangement will pilfer
real estate and other main corporate assets from the main company.

Why this is tolerated, who knows.

~~~
wahern
I was hoping something would come out during the bankruptcy proceedings. But
it seems that Lambert's buyout bid didn't result in any challengers putting
forth specific and substantive self-dealing claims, at least none that would
persuade a court to reject Lambert's offer.

Note: I can't read the WSJ article. I have subscriptions to NYT, FT,
Bloomberg, and The Atlantic, but not WSJ.

~~~
Twixes
How much do you spend on subscriptions per month?

~~~
wahern
Way too much. I keep meaning to cancel FT, which is about to renew for
$249.95/yr. I subscribed to Bloomberg intending to cancel FT. The regular FT
subscription doesn't provide access to the premium content, and the lineup of
non-premium commentators and journalists doesn't have anything substantive or
informative to say. I've subscribed to the FT, with a brief interruption circa
2015, for well over 10 years. Lately Bloomberg just seems to have more talent
(their cybersecurity reporting notwithstanding).

Earlier this year I accepted the $0.99/week deal for The NY Times. I'll
reconsider when it renews at the regular price next year.

AFAIK, my Bloomberg and Atlantic subscriptions are at the regular listed
price.

------
nscalf
I don't think I understand the financial system of bankruptcy very well, I
always thought that bankruptcy was a hard end of the line---your assets are
seized and sold off to pay back debts, etc. I've also heard business cases
while in school about companies like Kodak where bankruptcy seemed to be the
end. Can someone explain how bankruptcy often results in companies continuing
to run?

Edit: Thanks for the responses everyone. I'll do a bit more reading on chapter
7 vs chapter 11, very interesting stuff.

~~~
Spooky23
At a high level, there are reorganization and liquidation type bankruptcies.

Some companies get into trouble with debt, are victims of economic winds or
otherwise get into trouble. But the business is fundamentally still viable. So
the company declares chapter 11 bankruptcy, is able to break out of
unsustainable contracts, and the suppliers take a haircut.

Other companies are just done. So they declare chapter 7 bankruptcy, sell off
anything of value, and pay out creditors based on the judge/bankruptcy
trustees order.

------
tim333
The whole saga is an interesting tale of hubris from Eddie Lampert who was a
very good hedge fund speculator who thought that would translate into being a
good retail store operator but it didn't seem to work out.
[https://www.forbes.com/sites/michaellewitt/2018/11/07/do-
not...](https://www.forbes.com/sites/michaellewitt/2018/11/07/do-not-
resuscitate-the-saga-of-sears-hedge-fund-hubris-and-media-
ignorance/#2a51ce2e2148)

~~~
rasz
It never seems to pan out. Jack Tramiel, of Commodore fame, burned all his
retail partners so many times nobody wanted to carry Atari computers anymore.
His 'genius' solution was paying $67m for a chain of malls
[https://www.nytimes.com/1987/08/25/business/atari-to-
acquire...](https://www.nytimes.com/1987/08/25/business/atari-to-acquire-
electronics-retailer.html) He ended up losing at least twice that amount in
less than two years before writing it off.

------
Jgrubb
I don't follow this story closely, but I bet somebody here does:

My sense is that yeah there's Amazon and all the other missed opportunities,
but don't they also have some corporate raider type as CEO who's totally
cashing in on running this chain into the ground?

~~~
troydavis
> don't they also have some corporate raider type as CEO who's totally cashing
> in on running this chain into the ground?

Institutional Investor tried to answer that question in
[http://institutionalinvestor.com/article/b1c33fqdnhf21s/Eddi...](http://institutionalinvestor.com/article/b1c33fqdnhf21s/Eddie-
Lampert-Shattered-Sears-Sullied-His-Reputation-and-Lost-Billions-of-Dollars-
Or-Did-He). Their take:

"… ESL hasn’t lost the entire $1.5 billion it invested in Sears and Kmart
equity. Including the gains and losses on the major spin-offs, dividends, and
interest income, it appears that loss was narrowed to about $624 million.
Adding back the $2 billion in gains from hedge fund fees would give Lampert a
net profit of approximately $1.38 billion. And that’s not even counting the
uncertain value of his $2.6 billion in Sears debt, with its liens on Sears
real estate, among other items."

Industry consensus is that no one would have chosen to make this investment if
they knew what the next 10 years would look like, but given those abysmal
results, he did far better than any other stakeholder.

~~~
perl4ever
I get what you're saying, but really, it's kind of like saying of an ordinary
person - sure, they robbed that convenience store, but really, when you look
at how much time they put into preparation, they only made $5/hr, so they are
hardly "cashing in".

------
swami26
Artfully executed real-estate liquidation play

------
vermontdevil
Sears is basically a REIT owned by Eddie Lampert [1]

[1]
[https://www.institutionalinvestor.com/article/b1c33fqdnhf21s...](https://www.institutionalinvestor.com/article/b1c33fqdnhf21s/Eddie-
Lampert-Shattered-Sears-Sullied-His-Reputation-and-Lost-Billions-of-Dollars-
Or-Did-He)

------
jdlyga
What you can get at Sears you can get better at Mavis Discount Tire (much
faster tire replacement), Kohls (better, cheaper clothes), or Home Depot
(bigger tool selection). The main problem with Sears is that they forgot to
focus on keeping the quality up and customer service.

~~~
kiterunner2346
Never heard of "Mavis Discount Tire"! I Google'd "Mavis Discount Tire vs
Discount Tire" to find that the latter is suing the former for trademark
violations:

[https://news.bloomberglaw.com/ip-law/discount-tire-
lawsuit-c...](https://news.bloomberglaw.com/ip-law/discount-tire-lawsuit-
claims-mavis-rebrand-treads-on-trademark-1)

 _Wheel retailer Discount Tire claims a rebrand by Mavis Tire Supply
LLC—labeling its stores Mavis Discount Tire—violates its trademark rights.

The company’s Dec. 26 lawsuit says Mavis started renaming stores after buying
multiple chains located in the South and Midwest, where Discount Tire does
business. Mavis intends to confuse customers and profit from goodwill built up
in the Discount Tire trademark over decades, according to the complaint filed
in the U.S. District Court for the District of Georgia.

Mavis previously used Mavis Discount Tire branding only in northeastern states
with no competing Discount Tire stores, according to The Renialt-Thomas Corp.,
Discount Tire’s corporate name._

Looks like an interesting case!

~~~
perl4ever
Also in Mavis news, it was recently reported that a store falsified invoices
for brake work that may have lead to the crash that killed 20 people in
upstate NY last year:

[https://www.timesunion.com/news/article/Mavis-manager-
Invoic...](https://www.timesunion.com/news/article/Mavis-manager-Invoices-
falsified-brake-work-not-14503357.php)

"The alleged falsification of the records and the shop's purported failure to
perform work on the 2001 Ford Excursion were part of a systemic practice at
the auto service outlet as it tried to meet corporate sales quotas, according
to court records."

------
criley2
I mean this seems obvious from a thousand miles away.

Amazon changed the game fundamentally. The only two effective strategies are
to challenge them directly (Wal-Mart and their logistics and their free 2 day
shipping/no membership website competitor) or to effectively blend the
store/online experience with a huge push towards mobile ordering and curbside
pickup or gig-style personal shopping delivery.

I'm not sure why Sears thought they could half-ass this transition and kind of
do nothing to compete in today's market. Last time I was in a Sears, it was
eerie and quiet, it smelled old, the prices were NOT GREAT and I ultimately
priced the tools I wanted on Amazon for a good discount. Not like the old
Sears Craftsman name and warranty mean much anymore anyway.

~~~
bluedino
All your big hardware stores sell their own line of tools now (Lowe's I think
even sills crafstman now)

All your 'cheap' tools come from Harbor Freight

And the high-end is still Snap-on, MAC, SK, those kind of companies

So where does Sears fit in?

~~~
thrower123
At this point, the warranty on Harbor Freight's Pittsburgh hand tools is as
good or better than the Craftsman warranty. Quality doesn't seem to be much
different, either, but they are astonishingly cheap.

I still prefer to buy Milwaukee for my power tools, at least for anything
cordless - lack of battery standardization and interoperability sucks, so once
you start buying into one brand, you kind of want to stick with it, and the
M18 line is solid.

~~~
magduf
I have to disagree about the hand tools. The most recent Craftsman tools I've
seen have been pretty lousy, and Harbor Freight's tools have gotten pretty
darn good, especially considering the price. I have some HF tools, and for a
backyard/weekend mechanic, I would happily recommend them; I haven't had one
break on me yet (unlike Craftsman).

HF's power tools, on the other hand, I'm not so sure about, but they do look
like they've gotten better over the years.

------
kup0
I remember reading a long-form article about the decline of Sears and
Lampert's meddling and so forth that was really interesting, I believe this is
it:

[https://www.wsj.com/articles/how-sears-lost-the-american-
sho...](https://www.wsj.com/articles/how-sears-lost-the-american-
shopper-11552647601)

Outline here because I think it's semi-paywalled. The first time I got to it,
it was fine (maybe because I googled it):
[https://outline.com/84tyGU](https://outline.com/84tyGU)

------
ranDOMscripts
You mean Eddie Lampert's plan to pillage all of the valuable assets, pile on
company debt to buy the shares he owned, sue suppliers to keep providing
inventory(!) and enrich himself at the expense of the employees and other
stakeholders worked exactly as planned?[0]

...And in other news, water is wet.

[0][https://www.nytimes.com/2017/08/11/business/the-
incredible-s...](https://www.nytimes.com/2017/08/11/business/the-incredible-
shrinking-sears.html)

------
gefh
The real question is how much money did Eddie Lampert manage to take out?

------
RosanaAnaDana
There's a great book to be written about technology, leadership, and time
hidden in this story regarding Sears collapse. Think about it: they were the
original Amazon with catalog sales. Distribution, warehousing, they did it
all. It was revolutionary and the dominated the market because of it. If they
had real leadership in the early 2000's, they could have been Amazon again.
But what happened?

~~~
braythwayt
I think it has already been written:

[https://en.wikipedia.org/wiki/The_Innovator's_Dilemma](https://en.wikipedia.org/wiki/The_Innovator's_Dilemma)

;-)

You are correct, a specific dive into what went wrong at Sears and why they
aren't Amazon today would be incredibly valuable.

But re-reading "The Innovator's Dilemma" sheds some light as to why they not
only didn't, but really couldn't catch the Internet wave.

Incumbents need to recognize when a disruptive, extinction event is looming,
and everything in their culture works against that. Typically, when one of
these things comes along, sales are robust, the incumbents have cemented the
value of their brands, and their margins are industry-leading.

It's very difficult for incumbents to even see the disruption as a threat,
much less to pivot, embrace the disruption, and disrupt themselves.

When you're running a successful business, it is nearly impossible to decide
to go all-in on a new business that will cannibalize your existing business at
lower margins. If you're a public company, your stock will head right down
into the sewer to be gnawed upon by short-selling Norwegian Rats.

~~~
perl4ever
A company is not a person or a country though. Why _should_ it pivot to
something new? All the employees and shareholders are perfectly free to go do
something else.

~~~
braythwayt
Sears going into self-driving cars is a ridiculous pivot. Sears going into
online shopping is staying in the same industry, but adopting a disruptive
change to sales and distribution.

~~~
perl4ever
Well, it superficially seems like a simple change, but maybe in fact it
wasn't. As evidenced by the fact that Amazon built an empire and they
couldn't.

It's like when people say the moon landings were faked because the Van Allen
belts would have killed the astronauts. Well, how do we know the radiation
isn't lethal? Obviously because people went through to land on the moon!

------
musicale
I will be greatly surprised if Sears manages to come back from the dead after
being largely gutted/looted by Edward Lampert.

Toys R Us seems to have met a similar fate of acquiring massive debt (in its
case via a leveraged buyout rather than a merger) and then having all of the
money sucked out, but I still hope it might return somehow.

~~~
dehrmann
I'm still undecided on how much to blame Bain, KKR, and Vornado for this. They
did what private equity does: they bought the company and transferred the debt
to it and tried to restructure the company. They failed. But they bought it
because it had Toys R Us tried to remodel and relaunch in response to Walmart
and Target, but it wasn't a success. This was 2005, so Amazon wasn't even a
major player yet.

I'm not sure if PE exasperated the situation, slowed the bleeding, or caused
it to sink, but I doubt that Toys R Us 2005 was ready to face Amazon in the
coming years if it was struggling with Walmart and Target.

------
etxm
They should get back in the prefab home game[1] with the tiny house craze and
the impending ADU boom in California.

[1] -
[https://en.wikipedia.org/wiki/Sears_Catalog_Home](https://en.wikipedia.org/wiki/Sears_Catalog_Home)

~~~
defterGoose
Hey that's a great idea! Unfortunately it sounds like Sears' management would
be loath to consider any real "innovation" or "R&D".

------
griffinkelly
Wonder what's going to happen to the Guam Kmart...Its a lifeline to the
island.

------
exclusionzone
Same thing is happening to all these retail chains who kept buying up physical
real estate locations when the trend was clearly going against them. Sears had
bad management for a long time and it clearly shows.

------
neonate
[http://archive.is/wFqbD](http://archive.is/wFqbD)

------
uoaei
When did it become the norm that bankrupted corporations continue operations
pretty much as normal? I'm sure there's a lot of activity on the back end
navigating bankruptcy law, but I remember when companies would go bankrupt and
then promptly shut everything down.

------
sxates
I know there's a lot of commentary about the larger retail landscape being in
decline and the shift to Amazon and all that... But what my theory presupposes
is that Sears is committing suicide.

Last May they rebranded with a new logo, that looks like a cross between
AirBNB's logo and a natural gas flame. It looks like something they got from
Fiver or a stock image site. They're throwing away decades of brand equity for
this?

I hadn't been in a Sears in a long time, but when I saw the new logo it made
me go look at their site to see what they were up to. What I found was a
website chock full of big promotions, but also chock full of complicated fine
print. For example:

The offer: $60 in CASHBACK points when you spend $60

The fine print: _Offer valid 5 /5/19–5/18/19\. Members get $60 CASHBACK in
points in 6 weekly installments when you spend $60 or more on qualifying
purchases at select Sears stores and items sold by Sears on sears.com. First
$10 in points issued within 48 hours and are valid for 7 days. Subsequent
payments of $10 in points issued every Sunday starting 5/26/19\. Offer valid
5/5/19–5/18/19\. Maximum $60 CASHBACK in points per member._

So their website was plastered with $60 "cash back" offers, but they don't
give you cash back, they give you "points" worth $10 in weekly installments
that are only good for one week, so to get your $60 you have to come back and
buy at least $10 worth of stuff for 6 weeks in a row!

Also, almost everything worth buying is on the exemption list. This is the
exemption list just for Bedding (there were a lot more!):

 _Excludes Lands’ End, select mattresses (Chiswick, Chelsfield, Camberwell,
Cavell, East Channel, Harlington, Harrowby, Isleworth, Kenney, Romford,
Beautyrest Black, Sealy Conform Performance [High Spirits, Fondness and
Thrilled], Sealy Conform Premium [Gratifying and Wondrous], Stearns & Foster,
Serta iComfort, Serta iComfort Memory Foam, Serta iComfort Hybrid, Sealy
Hybrid, Simmons Beautysleep, Tempur-Pedic, Tempur-Flex), Protect-A-Bed,
SleepTracker, Mantua bed frames, adjustable bases (Beautyrest Smart Motions,
Sealy Ease, Serta Motion [Essential, Custom and Perfect], and Tempur-Pedic
[Tempur-Up, Tempur-Ergo Plus and Tempur-Premier]), Serta iComfort pillows,
Tempur-Pedic Tempur pillows, Stearns & Foster Premium pillows, Sealy Premium
pillows, Serta Premium pillows, Beautyrest Premium pillows. Items must be sold
by Sears. Purchase requirement before taxes and after other discounts and must
be made in a single transaction. By accepting Shop Your Way® member benefits
and offers, you agree to the Shop Your Way terms and conditions, available at
www.shopyourway.com/terms. Members earn points on qualifying purchases,
excluding sales taxes and other fees. Extra points are inclusive of, and not
in addition to, any base points earned on qualifying purchases. When extra
point offers are combined, total points earned will be less than the combined
point totals for each individual offer._

I found this astonishing! I've never seen such a complicated promotional offer
before, and it really feels like a big "fuck you" to anyone who would bother
to shop at their stores. Nobody wants to do business with a shop that's trying
to bait and switch them with deceptive "deals".

No wonder they're having trouble turning things around...

~~~
magduf
>it really feels like a big "fuck you" to anyone who would bother to shop at
their stores. Nobody wants to do business with a shop that's trying to bait
and switch them with deceptive "deals".

You'd be surprised; there's always a bunch of suckers out there. And some
businesses are able to get away with a big "FU" to customers: just look at
Apple and their AirPods (see articles about terrible battery life, inability
to replace battery, high price, etc.). But Sears isn't Apple, and there's only
so many suckers left willing to shop there, and they're all probably elderly.

------
lscotte
Paywalled story, not free to read.

~~~
RankingMember
[https://outline.com/XqxGcf](https://outline.com/XqxGcf)

