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Sears says it has secured a $250M lifeline, will close 96 stores (reuters.com)
47 points by hhs 15 days ago | hide | past | web | favorite | 66 comments

What makes me disgusted on this is how many Sears employees got taken along for the ride while people like Eddie Lampert greatly profited while company tanked. I highly recommend the following podcast by the Grubstakers as it illustrates exactly what I'm talking about:


To play the devil's advocate for a moment: Why is this a bad thing? The investors and CEO profited from Sears failing and (presumably) in this free market economy that money can therefore be better invested in non-failing companies. Otherwise it would've just been lost.

Let me be clear though that I absolutely do not agree with the above. But the reason why I'm proposing such a rhetorical question is because how do you stop this? How can you convince people that what they did was legally and ethically wrong? They intentionally ran the company into the ground to increase the short term profits so they could parachute away with a nice bonus at the cost of the lower level employees.

But if we want to stop this behavior then we need a way to codify it in law. A way to prevent the slash-and-burn style of CEO or investor management.

>Why is this a bad thing? The investors and CEO profited from Sears failing and (presumably) in this free market economy that money can therefore be better invested in non-failing companies. Otherwise it would've just been lost.

Sears isn't failing because the business wasn't sound. Sears is failing because Lampert decided to neglect the business and use the balance sheet to play financial games that destroyed the business once 2007 hit - and once it was time to actually make money, they had been sorely left behind. The company that invented the catalog and was shipping things from warehouses before it was cool didn't take the time to build a proper web platform. Sears was mismanaged and I'm even skeptical Lamport profited at all from the endeavor.

If some hedgefund took over Samsung and decided to divert all resources to invest in Dogecoin, and subsequently lost all of Samsung's money, I'd struggle real hard to call it anything other than a "bad thing".

Sears shut down the mail order operation in 1993. I don’t think Lambert had anything to do with that.

It’s not clear to me he’s actually been making money off the fiasco either. Wikipedia: “ In March 2012, Lampert was No. 367 on the Forbes world wealthiest people list with a net worth of $3.1 billion.[12] By August, 2016, Lampert had fallen to No. 810 on the list, with a net worth of $2.2 billion.[1]”

Maybe he would have been better off selling off sears for parts and putting the cash in an index fund...

I'm under the impression him and his group became controlling shareholders of Sears and asset stripped it. That is technically legal but Sears sued him for infringing on the other shareholder's rights during the process. https://en.wikipedia.org/wiki/Asset_stripping Lampert is also part of the group offering the lifeline loan. So he helped drain the company and is now going to profit from the loan to keep them alive.

Or he’ll lose his money on the loan too. That $500 million will all go down the drain if the company doesn’t have a turnaround. A loan is giving someone else money and you only profit if they pay you back in full with interest after all.

I saw a different article criticizing him for basically throwing his money away trying to keep Sears going... http://money.com/money/5498143/eddie-lampert-trying-to-save-...

> While Lampert hasn’t suffered like his employees, Sears’ decline has cost him: Since taking over as CEO in 2013, he’s lost almost half his fortune – once as large as $3.1 billion. During his peak before the financial crisis, Lampert managed over $15 billion at his hedge-fund. As his bet on Sears soured over the years, more and more investors abandoned him. By the end of 2017, ESL managed only $1.3 billion, according to filings with the Securities and Exchange Commission.

>Sears shut down the mail order operation in 1993. I don’t think Lambert had anything to do with that.

Are you sure about that? The Sears mailorder pickup location near here just closed down within the last 5 years. The town I used to live in had a Sears mail order pickup location that was still open at least 10 years ago.

The catalog was eliminated in 1993 https://www.nytimes.com/1993/01/26/business/sears-eliminatin...

I’m not sure what the pickup location you’re referencing would have been for. And if you’re picking it up from a store, that’s not exactly a ship to home service anyway.

The catalog was like the phone book. They still had a significant e-commerce operation. My dad ordered a lawn tractor from them in the late 90s.

It was a big deal because they used LTL freight and many of the areas where they were located didn’t have good UPS or Fedex coverage.

Along with the sibling comment: my hometown of 5,000 people had a Sears mailorder pickup/warranty location only close within the last 10 years or so.

My family had the catalogue come to our house well into the late 90’s/early 2000’s.

Sears was taken over by KMart in an LBO after they emerged from bankruptcy. They were pretty much fucked once that happened as KMart wasn’t exactly a well oiled machine.

It hasn’t been the old sears, Roebuck company for many years.

But not unique at all : Kodak, Nokia.

This is different as those were companies left flat footed due to their massive bloat and inability to change. Sears was systematically raided for money to buy back shares, and other schemes to benefit Eddie Lampert. He is doing this with Autozone too. And has done it with other companies. It saddles the company with debt and lack of investment.

The narrative around Nokia’s “demise” is kind of a half-truth. Of course Nokia would have preferred to keep being wildly successful in the mobile phone business, but their other business lines were largely still successful. I think there’s a perception that Microsoft bought everything but the name when they bought the phone division, but that’s simply not true: Microsoft bought the only major division of Nokia that was losing money! They remain one of the biggest networking equipment manufacturers in the world, with over 100,000 employees.

tl;dr: I don’t think they’re very comparable to Kodak. :)

> How can you convince people that what they did was legally and ethically wrong? They intentionally ran the company into the ground to increase the short term profits so they could parachute away with a nice bonus at the cost of the lower level employees.

I feel like you've answered your own question immediately after asking it. As a sibling commenter said, you can't convince someone this is legally wrong because it isn't, but any ethical system that places personal wealth creation over the well-being other humans isn't one I can respect.

> How can you convince people that what they did was legally and ethically wrong?

Well if it's not illegal (as is the case currently) it's silly to convince them it's legally wrong.

Regarding ethics, in theory (I do not consider this a realistic solution) you could advocate for corporate reform and start pushing more B-Corps onto the world. It's worked wonders for Patagonia, but they are definitely an exceptional example.

Fundamentally the problem is a dichotomy - value creation versus value extraction. Do we want to make value extraction illegal? I hope someone will respond telling me why that is a terrible idea, but it actually sounds like the sort of morals-first law that might be good for everyone except parasitic investors. And I mean...why do we want more parasitic investors?

I think it's fair to make the case that something should be legally wrong, hence why I mentioned it. Something can be legally wrong but not ethically wrong and vice versa, and the best way to fix the problem is to address both at the same time.

And I think the rationalization would be that investors create more value through ensuring efficient value extraction which then flows back into the economy. But overall I think you're right in that we should discourage value extraction because of how it leads to running businesses to favor yourself or your investors rather than the business itself.

The contrast is that what's good for investors isn't always good for the business and vice versa. Right now I don't think there's strong enough checks on investors, since even in the case of failures they often come out ahead.

Not sure I've I'm even playing Devil's Advocate here...but at least one factor is fed-pump cycles. Lots of cheap money around looking for any return.

If money was expensive, there would be less deals at the margin. And presumably, fewer Silicon valley-unicorn-hype firms that continue to loose money.

It will be brutal when it comes time to pay the piper.

From reprints of sears catalogs from the turn of the century to a secondhand 1970s catalog we had as toilet reading (and emergency toilet paper) I understood where I thought sears positioned. I think much of that market was hollowed out by others (Costco, Walmart, Amazon) but a lot was thrown away in corporate insanity which made a few people immensely rich and broke things for no value outside of that play.

I shopped in modern Sears a couple of times (I'm not a US resident) and it was sad. More staff than customers, a sense of doom, the kind of lighting designed to make you not linger (this is actually a thing. A shop here in Australia called Lowes which specializes in cheap big-man fashion has lights which are pretty much there to make you grab and run)

I got three pairs of Levi 501s at below any other suppliers price, 3x or more below Australian price. To be so significantly below market, you either have to have massive stockpiles of unsold asset you need to move to save storage costs, or you have to have some amazing sweet deals, or maybe both. But it said to me "this is simply not sustainable"

I too am amazed at the lingering mouldy corpse. I expected it to be fully dismembered, and anything called Sears was implicitly holding onto IPR to keep a venue, but actually sending money who knows where.

I probably wouldn't willingly go into one again, Ever. I might if they sold me online on an item and it was a pickup venue, but if they can sell it online and I pick up at target in a box, I'm good. Probably, I find another source for levi's

Why would anyone give them $250M? Is there any reason to think that Sears is going to be able to save itself from its inevitable demise? Sears used to be a trusted household brand -- my parents bought everything there, clothes, TV, tools, kitchen and household appliances -- but that hasn't been the case for years, maybe decades. Craftsman used to be a good brand for the non-professional, but those days are long gone.

Same reason anyone does, they expect a positive return given the terms. Staying open / selling assets = cash flow.

Yes, so that's my question, why do they expect this money losing retailer to turn around and not only stop losing money but also be able to pay back a $250M investment? Does Sears still own anything of value? Even if they own a lot of their stores, under today's retail climate I don't see that real estate being worth much.

There is probably well over $250m in inventory alone even if assessed at liquidation value. So it's probably a safe investment and the terms of the loan probably have liquidation preference.

Stanley Black & Decker is trying to resurrect Craftsman through a partnership with Lowe's. The tools themselves are probably as good as any other mid-range tools targeted at DIY customers.

The tools themselves are probably as good as any other mid-range tools targeted at DIY customers

Not in my recent experience -- I got a tool set for Christmas 2 years ago -- the ratchet broke on first use (the retaining clip that held it together either broke or was never installed), one of the box-end wrenches snapped off while trying to loosen a tight (but not corroded) screw on a lawnmower.

I think craftsman still has a lifetime warranty, but I didn't even try to replace the broken tools, I bought replacements of Home Depot's store brand (Cobalt?) and found them to be of better quality.

A couple years further back I bought a Craftsman floor jack, it broke on first use, a pivot pin was missing, so the entire jack arm bent over to the side when I tried to lift my car -- it wouldn't retract so I had to use my car's tire jack to lift the car enough to get the broken jack out.

I took it back to the store and the clerk said "Put it over by that other one", and that other one had the exact same problem.

> I think craftsman still has a lifetime warranty

No, although some 3rd party stores will still honor it.

> cobalt

Kobalt, yeah. They're possibly better, but probably not. I own a few things from them that have been perfectly functional, no complaints, but not high-quality.

I have very few modern craftsman tools--most of my hand tools are vintage--but I've found them to be comparable. I wouldn't be surprised if they all come from the same factory somewhere.

I have a lot of old hand-me downs from my father, his old craftsman stuff is still great. My brother got most of his Snap-on stuff (he uses it daily in his business, he needs the good stuff) and that stuff is fantastic -- some of it's had 20 or 30 years of heavy use. Though you pay the price for it (more than I'm willing to pay to turn a bolt on my lawnmower a few times a year :-) )

They either don't have real tight control over it or aren't really trying to resurrect it. Menard's, the worst big box DIY/builder store, stocks some crappy looking junk with Craftsman branding.

In the mid-90's if Sears had simply put their full catalog on the internet, with some basic search functionality, and a cart, you could then call and do a phone order, they'd have been ahead of everyone at that time. At that time Sears owned the phone ordering space. In the end, a relatively few simple steps would have let them hold and build their position. After Prodigy effectively failed, they figured the internet was another fad and wouldn't take off.

In the end, they failed on their leading advantages, and failed to execute time and again. Then they brought in some of the most unscrupulous management I've ever even heard of in terms of larger corporations.

> Sears said its owners have been “working hard to position... for success by focusing on our competitive strengths and pruning operations that have struggled due to increased competition and other factors.”

Strengths? What strengths? Unless it’s the only store around, there’s absolutely no reason to go to a Sears today.

Naive question from a guy who doesn't shop often: what kind of stores are replacing Sears for general "house" stuff for an average price, average quality? More specialized shops in boxstores? (I don't like driving and they tend to be located far from where I live)

I used to shop at Sears in Canada when they existed (until 2018). Now for appliances I go to home depot, and for kitchen stuff I go to Canadian Tire. Sometimes I browse Amazon but it's so full of rubbish/fraud I just end up giving up. I have to admit I once tried shopping appliances at Sears, and the sales people were just hawkish and creepy, like car salesmen.

IKEA, Bed Bath and Beyond, Winners, Homesense, Home Depot, Home Hardware, Best Buy, Leon’s, The Brick, The Bay, Jysk... I could go on and on and on. Sears has so much competition that there’s literally no reason to ever go there unless it’s closer than one of the above.

Fair enough. I had not realized how competitive things had become, because some of them are not in my neighbourhood, but most of them are within a 20km range.

If you have an Ace around you, they are awesome. I've talked to a reasonable number of employees that both cared _and_ knew what they were talking about. They also tend to have a huge variety of nuts and bolts and other hardware. Store was a little disorganized, but seemed to carry quality goods overall.

Basically for every category of what Sears sells there are better options:

1. Hardware and home renovation stuff? Lowe's or Home Depot

2. Appliances? Best Buy

3. Auto? Honestly I think the auto category was the one that was "decent" the longest, but now I'd go anywhere else.

4. "Softer Side of Sears" stuff? Target

You missed a very big one: Walmart. Walmart started in 1962. Before Walmart got big people bought a significant amount of stuff at Sears that they now buy at Walmart.

I'd say the most common places for automotive stuff would be Advance Auto Parts or AutoZone.

You go to Canadian Tire for kitchen stuff? Is that a typo? If not, can you explain?

Yep, if you're not familiar with the store, it's kind of like a Walmart, but there's one in my neighbourhood and they provide decent value, especially for tools and outdoors stuff.

Canadian Tire stocks a larger selection of kitchen utensils, cookware, small electrics, glassware, etc. than Walmart. It's a big chunk of the store.

Not much to explain. They've got kitchen stuff? And they let you take it home in exchange for money or canadian tire money.

They already sold off the craftsman tool line. That was literally the only reason to go to sears.

The "other factors" would be the extraordinary extraction of money by Eddie Lampert.

A similar story seems to have repeated itself with many retailers including Toys R Us.

Wow, the downfall of Sears is much slower motion than I ever expected. I thought they'd be a ghost by now.

Lampert isn’t a genius in turnarounds. He’s a genius in the art of prolonging corporate death.

Yeah the goal is to extract the most cash/value/assets as possible, the delays benefit that for the value extractors.

Leveraged buyouts are designed to slow bleed for this reason, bring down the cost both in growth prospects diminishing slowly and wearing resistance out so people sell low.

Walgreens is entering one right now or soon if not now, they are a target of private equity.[1] It won't end well for consumers or employees or public market holders, just the value extractors, they will cash in while they cash out Walgreens.

> Walgreens Boots Alliance shares surged Wednesday amid speculation that the U.S.-listed drugstore group has been considering a $70 billion take-private deal.

> If private equity can pull it off, it would be the biggest leveraged buyout ever, dwarfing the $45 billion transaction in which energy group TXU was taken private in 2007, just a year before the financial crisis rocked global markets and prompted unprecedented intervention by global central banks.

[1] https://www.marketwatch.com/story/walgreens-possible-70-bill...

I once had to read the book "Good to Great", and Walgreens was used as a prime example throughout the book. They drove their success by having a fanatical focus on convenient locations. I saw it once myself, they closed a store and opened a new one right across the street because it was a better location.

I always wondered how that strategy was faring once grocery stores started including pharmacies.

K-Mart filed bankruptcy 17 years ago, and Eddie Lampert has been picking through its bones for the past 16 of them.

Retailers take a really, really long time to die.

Retailers that used to bring in $55billion per year take a long time to die.

It's awful to see this happening, but I think the bigger question is, what can brick-and-mortar stores, with all that overhead, do to compete with a presence like Amazon?

Sure, Kmart/Sears might have gone online as well ... which would leave behind the advantages of physical scrutiny of purchases without the added shipping charges. I find it really hard to leave behind that approach to shopping. (I haven't seen any pros-and-cons for the environmental costs ... but I've noticed that nearly everything Amazon delivers arrives inside a throw-away box delivered by non-green vehicles.)

The idea of buying something online without being able to truly inspect/compare quality is a really big loss. (Trust the reviews? Not so much.)

>> what can brick-and-mortar stores, with all that overhead, do to compete with a presence like Amazon?

Be reliable. Amazon is horribly unreliable, that thing you bought last week may not ever be in stock again. It may not arrive in the time specified, it may be fake or of low quality. You might buy it again and get something different this time.

I can walk into Home Depot and buy something any day of the week and can usually rely on them to have things in stock and the price to stay somewhat the same.

>that thing you bought last week may not ever be in stock again.

Like at Marshalls, or any of the various deep discount odd lot stores. Reliability is not inherent in brick and mortar.

>what can brick-and-mortar stores, with all that overhead, do to compete with a presence like Amazon?

Vet their suppliers!

I can walk into any Walmart, Target, Home Depot, etc, etc in the United States, buy a light-bulb (just an example of a product they all carry) and be assured that it is going to do the job it is sold as being able to do for a reasonable amount of time and if not I can bring it back for an exchange or refund.

Brick and mortar will be fine. Retail is over saturated because of cheap debt costs, so shitty companies can live longer than they would in a normal cycle.

Smart stores are figuring it out. Target, Walmart, Aldi, high end brands, etc. Target is delivering the local delivery experience that Amazon has spent billions of dollars on, and they delivered 1.0 in a few months. Amazon can’t figure out how to send me unexpired crackers.

Amazon is a finance play that is already showing cracks. They need to use 3rd parties to keep inventory off the books. As a result, they are struggling with fulfillment of trivial items like books and have massive capital costs subsidized by AWS. Microsoft is already discounting for market share, and you’ll see Google do the same.

Target is kinda crushing it.

And Kohls and Best Buy as well.

Best Buy is the one that surprises me the most. I would have bet real money 10 years ago that they'd be gone by now. Instead they've doubled their market cap and earnings continue to grow.

Kohls accepts Amazon returns now. Then they hand you a 25% off coupon. People turn right around and shop at kohls with their new found return money. Brilliant strategy.

Best Buy too. I will buy Best Buy every time over Amazon. I know I'm getting legitimate product at the same price (price match). I would have said the opposite a few years ago.

Best Buy is big enough that the OEMs build models specific to Best Buy, sometimes with lesser features or components. Laptops, especially.

Only yesterday, I received a printed Amazon catalog in the mail. It's really funny to think about how things have come full circle.

“Sears was the Amazon of its day.”That may have been true but when we worked with Sears as an IT vendor in the 1990s they were so sclerotic it wasn’t funny. We started a project to move them from Type-1 token ring to Cat-5 100mbs Ethernet and they couldn’t pull the trigger for over four years. The insane level of bureaucracy in Hoffman Estates was mind-blowing.

Doesn't seem like a lot of money. The article doesn't say, so can anyone estimate, how long will that money last? They need to take $100mm straight off the top and allocate it to new R&D and not just "doing the same thing" maybe with a marketing iteration.

There are still open Sears-es? Where? All 4 Sears related stores closed near me back when I thought they closed them all.

Unless sears is purchased by FAANG then all articles should be hidden from the frontpage.

Its a junk retailer.


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