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If Sears Holdings Corp. is declaring bankruptcy, as many observers wish, the company will end up with a brand that has "no value," according to Chuck Tatelbaum, director of the law firm Tripp Scott.
Tuesday, after office hours, the Wall Street Journal announced that the troubled retailer had hired M-III Partners LLC to prepare a bankruptcy filing that may take place this week.
A sears
SHLD, -21.16%
bankruptcy would be the last of a long series of retail deposits, including Toys 'R' Us recently. However, unlike many previous bankruptcies and restructurings, there was still a brand to rebuild.
Sears is an iconic retailer known for its tool brands like Craftsman and Kenmore, as well as for its mail order catalog.
"The name is no longer what it was," Tatelbaum said. 'Toys' R' Us, FAO Schwarz and Brookstone have valuable names. Sears has done nothing to preserve its value. The shops are dilapidated. Anyone who is a good seller has gone away a long time.
"The brand has no value," he said.
Sears has seen its sales drop for years with nothing to improve customer attractiveness, as the retail business is transformed into innovative in-store experiences and convenient access to e-commerce.
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Through all of this, the company's chief shareholder and key lender, Eddie Lampert, its hedge fund, ESL Investments Inc., sold key assets to keep the business afloat.
By the end of September, Lampert had attempted to restructure the company pending repayment of its debt. Monday, a debt of 134 million dollars is due.
From the moment Toys 'R' Us declared bankruptcy, there was talk of reviving it. Last week, the company canceled a bankruptcy auction for its brand name and other intellectual property rights, proposing a reorganization plan.
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And in the case of Claire's, the company was able to continue with fewer stores.
"[Sears] This is a different type of procedure because the entity that comes out is in such bad shape, "Tatelbaum said. "Creditors have reduced their exposure, which is why there are so few stocks."
Neil Saunders, CEO of GlobalData Retail, writes in a note: "The problem with Sears is that it is a poor retailer. In clear terms, it has failed in all areas of retail, ranging from range to service, to commodity and basic standards of maintenance.
Saunders mentions the possibility of avoiding bankruptcy, but that would not solve the problems of the company.
"[I]In our opinion, this is not a long-term solution; it's just a way to extend the life of a company that has long since lost the will to live, "he wrote.
Tatelbaum mentions another possibility: Kmart, which became part of Sears in 2005 at the time of the bankruptcy, could survive.
Kmart is "serving a community that does not go to Neiman Marcus or Macy's," he said. "It addresses a customer to serve. Divorce can be good for them. "
These clients frequented dollar stores like Dollar General Corp.
DG + 0,90%
But even if Kmart can survive, it will face stiff competition in the sector, where retailers invest and grow to attract and retain customers.
"We consider Dollar General to be one of the most attractive" all-weather "investments in supermarkets, as the company can generate annual revenue growth of 8% to 9% while maintaining the defensive characteristics of 'a commodity (85% of total revenue)', Raymond James' analysts wrote in a note on August 30th.
"Other Dollar General bullish themes include: a) increased market share; b) the impressive return on investment of store renovations; (c) operational improvements that help reduce regression losses; and (d) the growth of cash dividends and share repurchases. "
At the end of the day, however, creditors and others who deal with Sears could lose a lot in the event of bankruptcy.
"In bankruptcy, you will have a business that will have virtually no free and clear assets to pay for employees, suppliers, creditors, and so on. [etc.]"Said Tatelbaum.
Patrick Dinardo, partner at Sullivan & Worcester LLP, highlights the impact on shopping centers, which are already suffering from major changes in the retail business.
Some malls, like the one near him in Burlington, Massachusetts, have reduced the size of his local Sears from two to one, reducing their risk.
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"But Sears was an anchor in the center of the United States and I'm not sure that all these centers have options," he said.
There is one person who should be fine if a bankruptcy occurs.
"Eddie Lampert will be fine," said Tatelbaum. "Will he lose money? Sure. But in the process, they protected themselves.
Lily: Yes, Sears may collapse, but his main actor will be fine.
Sears shares are down almost 30% on Wednesday and nearly 94% last year. The SPDR S & P Retail ETF
XRT -1.99%
up by 17% for the last 12 months, the Amplify Online Retail ETF
J & # 39; BUY, -4.36%
gained 23.3% and the S & P 500 index
SPX, -2.50%
is up 10.7% for the period.
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