Sears, the once-popular retailer, appears to be struggling to survive as we move through 2021. Sears Holding Company was formed 16 years ago via a merger between Sears, Roebuck & Co. and Kmart Holding Corporation. The company filed for bankruptcy nearly three years ago and very few Sears store locations remain operational.
The merger, which executives at both retailers hoped would inject new life into the combined company, was disappointing. Sears Holding Company filed Chapter 11 paperwork in 2018.
Sears and Kmart merger
In 2005, Sears merged with the also-struggling retailer Kmart. Prior to the merger, Kmart Holding Corporation was publicly traded on the Nasdaq Exchange under the ticker symbol "KMRT." Sears, Roebuck & Co. was also a public company and traded on the NYSE under the symbol “S.”
The merger of the two retailers created the new corporation, Sears Holding Corporation, which listed for trading on the Nasdaq as “SHLD.” At the time of the merger, Sears Holding was to be the third-largest U.S. retailer with about $55 billion in annual revenues.
Sears filed for bankruptcy
In October 2018, Sears filed for Chapter 11 bankruptcy when about 700 Sears stores remained in the U.S. In comparison, there were a combined 3,500 Sears and Kmart stores at the time of the 2005 merger.
Part of the bankruptcy deal included closing about 142 of the remaining store locations, many of which were in shopping malls that had lost their appeal for U.S. shoppers.
In 2018, CNBC reported that multiple CEOs of other retailers saw the failure of the merger well in advance of the bankruptcy. Former CEO of Sears Canada, Mark Cohen, stated at that time that the company “was toast about a day after it closed.”
Another former retail executive, former Toys "R" Us CEO Gerald Storch, said that Sears had long lacked a “sustainable competitive advantage.” However, the toy retailer has seen its own share of struggles. Storch noted that it didn’t excel in any areas important to consumers.
Telsey Advisory Group CEO Dana Telsey told CNBC at the time of Sears’ bankruptcy that it had been “a long time coming.”
Sears is still $80 million in debt to administrative creditors. Also, legal bills for the bankruptcy proceedings have reached nearly $250,000, according to Debtwire data.
Sears and Edward Lampert
Edward Lampert, the chairman of Kmart, engineered the Kmart and Sears merger. He also acquired the remaining Sears and Kmart stores through a new company, Transformco, in 2019. Sears, which had once been a “multifaceted mammoth” of retail, ended up spinning out many of its profitable business segments.
The number of Sears and Kmart stores has steadily dwindled, both post-merger and since the bankruptcy filing. Competition with big-box and e-commerce retailers like Walmart and Amazon, plus the demise of shopping malls, played roles in Sears’ downfall.
Plaintiffs in lawsuits filed by Sears Holdings and former Sears unsecured creditors alleged that Lampert’s involvement escalated the downfall of the retailer. According to RetailDive, the plaintiffs said, “Lampert caused billions of dollars of cash and other assets to be transferred to himself, Sears Holdings's other shareholders and other third parties.”
Only a handful of Sears and Kmart stores are still open. As of December 2020, CNN Business noted that there were about 74 Sears and 48 Kmart stores left.