13 Feb, 2019
Eddie Lampert’s New Plan
A bankruptcy judge approved the sale of Sears, the largest retailer in the world, to its chairman, Eddie Lampert.
Lampert had previously won an auction to buy the beleagured chain out of bankruptcy for more than $5.2 billion. The deal, which is expected to close on Friday, will keep the 126-year-old retailer from liquidating. Lampert’s offer will keep about 400 stores open and about 45,000 of Sears' workers employed. When Sears filed for bankruptcy in mid-October, it had 687 stores and about 68,000 workers.
Sears has been struggling to survive for years. The company’s sales tumbled from $53 billion in 2006 to less than $17 billion in 2017. Lampert has blamed the company’s grave decline on the media, shifts in consumer spending, and the rise of e-commerce, among other reasons.
For years, he has kept the ailing retailer afloat through billions of dollars in loans from ESL, the selling off of valuable real estate, and the slow dismantling of Sears' exclusivity over some big American brands.
Some stores have suffered severe decay, such as crumbling walls, cracked floors, collapsing ceilings, and a lack of working toilets for weeks on end, according to store visits and interviews with Sears employees over the past two years. In addition to maintenance problems, several stores featured barren shelves and empty floors long before the bankruptcy filing. This was most likely the result of suppliers exacerbating Sears' problems by threatening to cancel contracts and demanding new payment terms for orders.
«We have no idea about the destiny of Sears," one Sears store employee, who asked to remain anonymous, told last month. «Inventory has been reduced. Management has no idea if we are getting spring merchandise. We are so poor we can’t afford to hire a loss-prevention person to watch for shoplifters … Floors are dirty due to the fact that we can’t pay our cleaning crew.»
Before Sears, Lampert had no experience in retail. The big plan he hoped would transform Sears was a rewards program called Shop Your Way, which the company introduced in 2009. Through the program, frequent buyers accumulate points for their Sears and Kmart purchases and turn them into coupons and discounts. One primary goal of Shop Your Way was to acquire customers' personal information and sell it to other companies, according to a former executive who worked on the program.
Lampert aggressively pushed the rewards program, requiring store employees to meet ambitious quotas for new sign-ups. But in many ways it backfired. The program is complicated and has held up lines at checkouts, angering customers. At the same time Lampert was pushing Shop Your Way, employees started complaining that Sears had stopped investing in its physical stores.
«While we have been criticized for not investing more in our stores, I have explained in the past that the investments in our transformation go well beyond our stores, but don’t ignore our stores," Lampert wrote in a letter to shareholders in February 2016. «We believe that our investments in the Shop Your Way membership platform and our integrated retail capabilities were more appropriate investments given the massive shift in how customers are shopping and how competition has evolved.»
Sears stopped reporting its e-commerce growth in 2014. Lampert conceded in 2016 that the company had «fallen short» on getting customers engaged in the program.
More recently, Lampert has focused on closing hundreds of stores to turn Sears into a more «asset-light» organization focused on a small number of profitable locations.
The company’s store count has dropped from 1,980 stores in 2013 to fewer than 600 today.