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Photo of Mario Tama / Getty Images
Sears was founded by Richard W. Sears and Alvah C. Roebuck 132 years ago. It was originally a watch company, but it quickly expanded and became a major catalog retailer. For more than 100 years, he has been the cornerstone of the American retail business. But his glorious story may soon end: Last week, Sears Holdings declared bankruptcy. Edward S. Lampert, his CEO until Chapter 11, is tasked with tipping the iconic company on the ground and forcing it to go bankrupt.
What will happen now?
Let's look at each of the different stakeholders.
Investors: The company will deposit its liabilities and assets. Liabilities include all the company's debts, as well as wages, pensions, and so on. Assets are assets that are not encumbered with liens or mortgages. According to Ryan Glover of Seeking Alpha, liens with liens on assets make them more likely to be repaid first during a bankruptcy. Since Sears has more liabilities than assets, it is likely that shareholders will have received little or no pay.
According to Glover, very few cases in recent years have been left to pay shareholders after bankruptcy. This means that even if a company goes out of business, the old shares will cease to be traded and will be declared worthless. Investors most likely to be awarded new shares in a previously bankrupt company are the debt holders of a corporation. In the end, not a productive outcome for all these shareholders.
Customers: Shopping at Sears now has a number of disadvantages. If you buy a Sears appliance, you'll want it repaired if you have a problem. In the past, Sears repair service was always respected. Now, you have to wonder if Sears will be there to fix the device or the TV. I think this will definitely drive some customers to Best Buy, where Geek Squad will help solve all the problems. Bottom line, unsurprising prospects for continued customer loyalty.
Vendors: Vendors are afraid to get paid and some will insist on a cash payment. Of course, they want the doors of Sears to remain open so they can sell their goods, but they wonder if they will be paid. Some have already filed lawsuits for their money, some have even claimed to be defrauded (like In Gear Fashion, which filed $ 840,000 for Chicago Sun Times. Sears did not respond to the request for comments from the publication). For its part, WWD states that VF Corp. and Levi Strauss had prepared for the eventual Sears bankruptcy. Ultimately, this means fewer opportunities for constructive relationships with suppliers.
Competition: dissatisfied customers will want to find new shopping destinations. Competitors who intensify and promote their offers will see these consumers make their way. In the end, a win for retailers who act fast.
Sears closes 142 stores in addition to the 46 already announced. That would leave 693 stores. However, I think that there will probably be more closures and Sears will become a mega-mall oriented small business. After all, we must not forget that President Lampert formed Seritage Growth Properties (a REIT). Seritage will have the advantage of leasing closed store spaces to other retailers at a higher rental rate than Sears had paid when they occupied the space.
Will Sears recover?
While Sears was once a powerful force in retail with a wide range of products and a respected brand reputation, it is now an insignificant company compared to Amazon, Best Buy, Walmart, Target and others. There is no reason to shop at Sears.
Long-term warranties for household appliances and electronics, which were a valuable benefit to the consumer, are no longer guaranteed. There is no reason to shop at Sears.
Many of the valuable assets of the Sears brand are no longer exclusive. Craftsman tools and ultra-tough batteries are available everywhere. There is no reason to shop at Sears.
I think Sears Holdings is part of the history books.
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Photo of Mario Tama / Getty Images
Sears was founded by Richard W. Sears and Alvah C. Roebuck 132 years ago. It was originally a watch company, but it quickly expanded and became a major catalog retailer. For more than 100 years, he has been the cornerstone of the American retail business. But his glorious story may soon end: Last week, Sears Holdings declared bankruptcy. Edward S. Lampert, his CEO until Chapter 11, is tasked with tipping the iconic company on the ground and forcing it to go bankrupt.
What will happen now?
Let's look at each of the different stakeholders.
Investors: The company will deposit its liabilities and assets. Liabilities include all the company's debts, as well as wages, pensions, and so on. Assets are assets that are not encumbered with liens or mortgages. According to Ryan Glover of Seeking Alpha, liens with liens on assets make them more likely to be repaid first during a bankruptcy. Since Sears has more liabilities than assets, it is likely that shareholders will have received little or no pay.
According to Glover, very few cases in recent years have been left to pay shareholders after bankruptcy. This means that even if a company goes out of business, the old shares will cease to be traded and will be declared worthless. Investors most likely to be awarded new shares in a previously bankrupt company are the debt holders of a corporation. In the end, not a productive outcome for all these shareholders.
Customers: Shopping at Sears now has a number of disadvantages. If you buy a Sears appliance, you'll want it repaired if you have a problem. In the past, Sears repair service was always respected. Now, you have to wonder if Sears will be there to fix the device or the TV. I think this will definitely drive some customers to Best Buy, where Geek Squad will help solve all the problems. Bottom line, unsurprising prospects for continued customer loyalty.
Vendors: Vendors are afraid to get paid and some will insist on getting a C.O.D – cash on delivery – arrangement. Of course, they want the doors of Sears to remain open so they can sell their goods, but they wonder if they will be paid. Some have already filed lawsuits for their money, some have even claimed to be defrauded (like In Gear Fashion, which filed $ 840,000 for Chicago Sun Times. Sears did not respond to the request for comments from the publication). For its part, WWD states that VF Corp. and Levi Strauss had prepared for the eventual Sears bankruptcy. In the end, this means fewer opportunities for favorable supplier relationships.
Competition: dissatisfied customers will want to find new shopping destinations. Competitors who intensify and promote their offers will see these consumers make their way. In the end, a win for retailers who act fast.
Sears closes 142 stores in addition to the 46 already announced. That would leave 693 stores. However, I think that there will probably be more closures and Sears will become a mega-mall oriented small business. After all, we must not forget that President Lampert formed Seritage Growth Properties (a REIT). Seritage will have the advantage of leasing closed store spaces to other retailers at a higher rental rate than Sears had paid when they occupied the space.
Will Sears recover?
While Sears was once a powerful force in retail with a wide range of products and a respected brand reputation, it is now an insignificant company compared to Amazon, Best Buy, Walmart, Target and others. There is no reason to shop at Sears.
Long-term warranties for household appliances and electronics, which were a valuable benefit to the consumer, are no longer guaranteed. There is no reason to shop at Sears.
Many of the valuable assets of the Sears brand are no longer exclusive. Craftsman tools and ultra-tough batteries are available everywhere. There is no reason to shop at Sears.
I think Sears Holdings is part of the history books.
