NEW YORK • Sears filed for Chapter 11 bankruptcy protection Monday, buckling under its massive debt load and staggering losses.
The question now is whether a smaller version of the company that once dominated the American retail landscape can remain viable or whether the iconic brand will be forced out of business.
Both stores in Colorado Springs will remain open, however. They weren’t on the list of unprofitable stores closing this year.
Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred massive losses over the years.
“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “Hopefully, a smaller new Sears will be healthier.”
The company has struggled with outdated stores and complaints about customer service. That’s in contrast with chains such as Walmart, Target, Best Buy and Macy’s, which have had stronger sales as they benefit from a robust economy and efforts to make the shopping experience more inviting by investing heavily in remodeling and de-cluttering their stores.
Sears Holdings, which operates Sears and Kmart stores, will close 142 unprofitable stores near the end of the year, with liquidation sales expected to begin shortly. That’s in addition to the closure of 46 unprofitable stores that already had been announced. Edward Lampert has stepped down as CEO but will remain chairman of the board. A new Office of the CEO will be responsible for managing day-to-day operations.
The first Sears store in Colorado Springs opened in early 1928 at 120 S. Tejon St. It left downtown for the Southgate Shopping Center, 2050 Southgate Road, in February 1957.
For a time, the company operated a 5,000-square-foot “satellite” store at 3940 E. Palmer Park Blvd. in the Rustic Hills area.
The retail giant opened a second Colorado Springs store in Chapel Hills Mall, 1650 Briargate Blvd., in August 1982.
Sears Holdings closed the company’s last Kmart store in Colorado Springs at 3020 N. Nevada Ave. in April. The chain once operated five stores in the Colorado Springs area, including at Chapel Hills Mall, on Powers Boulevard and on Airport Road.
But Monday, Sears Holdings joined a growing list of retailers that have filed for bankruptcy or liquidated over the past few years in a fiercely competitive climate. Some, such as Payless ShoeSource, successfully emerged from reorganization in bankruptcy court. But plenty of others, including Toys R Us and Bon-Ton Stores, haven’t. Both were forced to shutter their operations this year soon after Chapter 11 filings.
Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing landlords to its tens of thousands of workers.
Lampert, the largest shareholder, has been lending his own money for years and has put together deals to prop up the company, which in turn has benefited from his own ESL hedge fund.
Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., after earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands’ End.
In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets, such as Kenmore, through his hedge fund as a $134 million debt repayment came due Monday.
Lampert 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 to remain on the stock index. In April 2007, shares were trading at about $141. The company, which once had 350,000 workers, has seen its workforce shrink to fewer than 90,000 people this year.
As of May, it had fewer than 900 stores, down from a 2012 peak of 4,000.
In a March 2017 government filing, Sears cited “substantial doubt” that it could stay open but insisted its turnaround efforts would mitigate that risk.
Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land and by enticing customers with a loyalty program. But losses continued, and the company struggled to get more customers.
Jennifer Roberts, 36, of Dayton, Ohio, was a long-time fan of Sears and has fond memories of shopping there for clothes as a child. But in recent years, she said, she’s been disappointed by the lack of customer service and outdated stores.
“My mom had always bought her appliances from Sears. That’s where my dad got his tools,” she said. “But they don’t care about their customers anymore.”
She said a refrigerator her mother bought at Sears broke after two years and still hasn’t been fixed.
“If they don’t value a customer, then they don’t need my money,” Roberts said.
Sales at the company’s established locations tumbled nearly 4 percent during its fiscal second quarter. Still, that was an improvement from the same period a year ago. Total revenue dropped 30 percent in the most recent quarter, hurt by continued store closings.
“The problem in Sears’ case is that it is a poor retailer,” Saunders wrote in his analyst note.
“Put bluntly, it has failed on every facet of retailing from assortment to service to merchandise to basic shop keeping standards. Under benign conditions, this would be problematic enough but in today’s hyper-competitive retail environment it is a recipe for failure on a grand scale.”
For decades, Sears was king of the American shopping landscape. Sears, Roebuck and Co.’s iconic catalog featured items from bicycles to sewing machines to houses, and it could generate excitement throughout a household when it arrived. The company began opening stores in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s. But the onset of discounters such as Walmart created challenges for Sears that have only grown. Sears faced even more competition from online sellers and appliance retailers such as Lowe’s and Home Depot.
Store shelves have been left bare as many vendors have demanded more stringent payment terms, says Mark Cohen, a professor of retailing at Columbia University and a former Sears executive.
Meanwhile, Sears workers are nervous about what kind of severance they’ll receive if their stores close.
John Germann, 46, gets $14 per hour as lead worker unloading merchandise from trucks at the Chicago Ridge, Ill., store, which has been drastically reducing its staff since he started nine years ago. Germann now has 11 people on his team, compared with about 30 a few years ago.
“We’re doing the job of two to three people. It’s not safe,” he said. “We’re lifting treadmills and refrigerators.”
The Gazette’s Wayne Heilman contributed to this story.