Retail giant Sears filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated U.S. malls, Reuters informs.
The Chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co and Kmart Corp, follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004.
Lampert had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance.
However, the company has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company’s stock and lent it money. It has sold off the legendary Craftsman brand and is considering an offer from Lampert for the Kenmore appliance name.
The company listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York. The bankruptcy filing was sparked by a standoff between Lampert, the company’s biggest shareholder and lender, and a special board committee, over a rescue plan proposed by Lampert.
NBC News adds that some companies like Payless ShoeSource have had success emerging from reorganization in bankruptcy court but plenty of others haven’t, like Toys R Us and Bon-Ton Stores Inc. Both retailers were forced to shutter their operations this year soon after a Chapter 11 filing.
“This is a company that in the 1950s stood like a colossus over the American retail landscape. Hopefully, a smaller new Sears will be healthier,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy.
In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets like Kenmore through his hedge fund as a $134 million debt repayment comes due on Monday. Lampert personally owns 31 percent of the company’s shares, and his hedge fund has an 18.5 percent stake, according to FactSet.
“It is all well and good to undertake financial engineering, but the company is in the business of retailing and without a clear retail plan, the firm simply has no reason to exist,” said Neil Saunders, managing director of GlobalData Retail, in a recent analyst note.
Sears’ stock has fallen from about $6 over the past year to below the minimum $1 level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around $141. The company, which once had 350,000 workers, has seen its workforce shrink to fewer than 90,000 people as of earlier this year.
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