“It’s a sad day for American retail,” said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm. “There are generations of people who grew up on Sears and now it’s not relevant. When you are in the retail business, it’s all about newness. But Sears stopped innovating.”
That’s right, the once iconic Sears has officially filed for bankruptcy.
Approximately 30% of businesses fail because the owner runs out of money. Bankruptcies in the United States increased to 25,227 businesses during the second quarter of 2016, from 24,797 during Q1. Not too many of the annual bankruptcies, however, involve businesses that once ruled the domestic retail market for nearly a century.
According to Reuters, Sears filed for Chapter 11 bankruptcy in mid-October and plans on closing 142 of its 700 stores by the end of the year. The 142 stores have proved to be unprofitable and their lack of production has forced the company to focus on reorganizing around a smaller base of its most valuable stores. Additionally, an earlier announcement stated that another 46 unprofitable stores are expected to be closed throughout November.
Approximately 7.5% of all documents get lost at some point and 3% of the remainder get misfiled. These documents are vital for any organization and should be properly stored, but, unfortunately, they don’t always convey a company’s success and aren’t always filled with positive information.
Sears listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York. Additionally, it listed the Pension Benefit Guarantee Corp., the federal agency that insures pensions, as Sears’ biggest unsecured creditor; however, the amount the company owed was listed as “unknown.”
“This is a company that in the 1950s stood like a colossus over the American retail landscape,” added Johnson. “Hopefully, a smaller new Sears will be healthier.”
The once retail titan now joins a list of growing retails that have filed for bankruptcy or liquidated in recent years, including notable companies Toys R Us and Bon-Ton Stores Inc., which were forced to shut down all operations after Chapter 11 filings. It’s important to note that some retail organizations, like Payless ShoeSource, were able to successfully emerge from reorganization in bankruptcy court.
“That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure,” added Neil Saunders, managing director of GlobalData Retail. “In our view, too much rot has set in at Sears to make it a viable business.”
The company’s largest shareholder, Edward S. Lampert, has stepped down as Chief Executive Officer (CEO) but will remain chairman of the board. A new CEO will be announced and will be responsible for managing day-to-day operations. Sears has secured $300 million in financing from banks in order to keep operations going throughout its bankruptcy.
Over the past 10 years, Sears has shut down more than 1,000 stores; over the past five years, it lost roughly $5.8 billion.