Sears, the iconic American retailer that has been in financial trouble over the last few years, will stay alive, at least for now. The company’s chairman and largest shareholder Eddie Lampert was able to win a bankruptcy lawsuit which helped avert the possibility of liquidation. Lampert was the only person who put a bid to take over the whole company. The billionaire offered $5 billion as part of the deal through an affiliate of his hedge fund ESL. It’s not clear though how the deal will be structured or whether there were changes in the final terms.
This information is still not public and the people we spoke to did it on condition of anonymity. The only thing now left is for the plan to get approval by the bankruptcy judge that has been overseeing the process. Lampert could be able to keep at least 400 stores open for the time being. This will also mean that tens of thousands of jobs will be saved.
Sears was founded nearly 132 years ago as a mail order service. However, the emergence of e-commerce negatively impacted its business and that of other major brick and mortar retailers. People are changing the way they shop and even though there are still a lot of people who prefer to go to these department stores, it’s becoming clear that over the next decade a big percentage of shoppers will be doing so online.
Although it’s great to see that Sears has survived liquidation at the moment, it’s still not clear whether the retailer can still survive the highly brutal retail space dominated by e-commerce giants like Amazon. But in case it fails to do so, it will not be the only one going under in the era of the digital economy. Other notable retailers that have gone bankrupt so far include Toys “R” Us, Bon-Ton Stores, Sports Authority etc.
Sears filed for Chapter 2 bankruptcy in October last year. At the time, the company had a total of about 687 stores and 68,000 employees. Sears also operates Kmart. But its fall from the top has been so fast and so sudden. During its peak year in 2012, the company had a total of 4,000 stores across the US making it one of the largest retailers in the country at the time. But that number reduced significantly over the years.
Lampert has maintained that there’s still a lot of growth potential for the company. But many industry analysts who have followed Sears over the last few years are still very skeptical. The argument from the optimists is that the shrunken presence of Sears across the country will help enhance efficiency. This will then facilitate the company to return to profitability in the near future. Lampert owns about 31 of Sear’s outstanding shares and his hedge fund has an 18.5% stake. The road ahead though looks bleak but there’s still a little hope that perhaps the retailer will turn the corner soon.
