Sears files bankruptcy, but the brand’s rebirth seems dubious

In filing for bankruptcy, Sears seeks to restructure its finances and start anew. The question is: Can its public profile be salvaged?

The retail giant, which once dominated U.S. business selling homes and everything that went in them, filed for bankruptcy to restructure $5.5 billion of outstanding debt. The filing includes the removal as CEO of Edward Lampert, who has been using personal money and the hedge fund he manages to keep the company afloat.

Sears has long been losing its luster, reporting major losses, selling off legacy brands like Craftsman, and seeing its stock price drop below $1.

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Now the company is announcing its next step, including the shuttering of 142 more stores.

NPR reported:

"The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability," Lampert said in a statement.

The move results from a stalemate between Lampert and a special advisory board on the future of the company. Lampert will now be removed as CEO but will remain chairman of the board and still has lots of leverage, including his 31 percent shareholder stake and the loans coming from his hedge fund for the bankruptcy procedure.

The New York Times wrote:

As part of the reorganization plan, Sears has negotiated a $300 million loan from Wall Street lenders to help keep its shelves stocked and employees paid.

The company said it was still negotiating with Mr. Lampert’s hedge fund, ESL Investments, for an additional $300 million loan. Mr. Lampert will step down as Sears chief executive, but will remain the company’s chairman. Three other Sears executives will serve in a newly created role, the office of the C.E.O., overseeing daily operations.

“ESL invested time and money in Sears because we believe the company has a future,” Mr. Lampert said in a statement on Monday.

Some see Lampert’s role as a conflict of interest:

Really an object lesson in how to destroy a company through hedge fund extraction of all the financial assets. https://t.co/FqIkJudf9R

— David Dayen (@ddayen) October 15, 2018

it's amazing how many of these stories involve hedge funds stripping the acquired firm of all its valuable assets https://t.co/2QtvvFJM2F

— Faster, Pussycat! Shrill! Shrill! (@theshrillest) October 15, 2018

Understand that Sears is declaring bankruptcy, when its number one creditor is the hedge fund run by the chairman and chief executive of the company. Who also is bidding on the company's top assets.

— David Dayen (@ddayen) October 15, 2018

The financial engineering that Lampert used in trying to save the company has distracted from a deeper issue for the brand: It lost touch with its customers.

ABC News reported:

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'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.

The company has name recognition, but perhaps for the wrong reasons. Analysts are skeptical about whether Sears can make a comeback, even after restructuring.

ABC continued:

"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.

"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."

Some people recall the Sears legacy.

NPR reported:

"Sears is an American institution," Jerry Hancock, self-proclaimed Sears scholar and historian, told NPR on Sunday. "There are actually a number of communities in North Carolina where almost the entire town is Sears houses that were purchased through the catalog."

"Sears taught America about the modern world through this catalog," he said. "It completely changed American life. That catalog was sort of a window into this new consumer world, and it really made a connection with people."

Other big retailers that underwent major restructuring have failed to reemerge, including Toys R Us.

Perhaps Sears’ decline is best summarized in a tweet:

But seriously who goes to Sears for anything.

— Mel Jackson (@jacksonmel20) October 15, 2018

What do you think of Sears’ communication efforts, PR Daily readers?

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