Sears Is Out of Bankruptcy, but "The End" Is Coming, Expert Says—Here's Why
The once iconic retailer has all but completely vanished in recent years.
If you're looking for an example of how the retail world can be challenging for businesses of any size to stay afloat, look no further than Sears. The iconic retailer has gone from a shopping mall hub to a standing empty relic as the company's once-ubiquitous presence continues to shrink. Despite some big changes and financial maneuvering, store locations continue to dwindle. And although they've recently managed to get out of bankruptcy, experts say "the end" is still coming for Sears. Read on to see why some are convinced the retailer's days are numbered.
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Sears has steadily declined in the last decade.
While it might be hard for some people to remember the last time they set foot in a Sears, it wasn't long ago that the company dominated the American market. But after it managed to become the largest retailer in the U.S. by the 1980s, the company saw its fortunes reverse as sales slumped through the following decade. By 2004, the company was purchased by Kmart in an attempt to help both struggling companies revive themselves. After nearly a decade and a half of shrinking store counts, though, the company declared Chapter 11 bankruptcy in 2018, Forbes reports.
Since then, current parent company Transformco has attempted to hold the businesses together with a "go-forward store strategy for Sears and Kmart is to operate a diversified portfolio consisting of a small number of larger, premier stores with a larger number of small-format stores," according to a company statement to USA Today in Sep. 2021. Part of the plan included the more than 300 Sears Hometown Stores that were open at the time, which are "primarily operated by independent dealers or franchisees of an affiliate of Transformco." However, recent months have seen a wave of closures for the company, with more than 100 locations shuttering this past spring, CNN reported.
Even though Sears may be out of bankruptcy, experts say "the end" is likely coming for the store.
Sears's troubles have not been limited to its shrinking storefront footprint. The wilting retail giant has also been embroiled in a legal battle that has held its bankruptcy case in limbo for nearly four years. In a lawsuit brought forward by the chain's creditors and suppliers waiting to get paid for goods and funds furnished in the months before it filed for Chapter 11, plaintiffs allege that "[a]ltogether, Lampert caused billions of dollars of cash and other assets to be transferred to himself, Sears Holdings's other shareholders, and other third parties," Retail Dive reported in August.
The long legal deadlock over the company's future finally broke in late August when a federal bankruptcy judge approved a $175 million settlement between current Transformco CEO Eddie Lampert and Sears Holdings, Retail Dive reported. As a result, Sears Holdings was finally able to implement its reorganization plan as of Oct. 29, bringing it out of bankruptcy and beginning a liquidation process for the company's remaining assets, Fox Business reported.
But while the struggling company is now finally able to move forward, years of closures have left it in a much more vulnerable position than before the lawsuits began. And with fewer than two dozen retail locations remaining, one expert says it's unlikely the retailer will survive.
"They do not have an appealing value proposition to customers, and the amount of competition in the retail marketplace offering similar goods means the end will come at some point," Ray Wimer, PhD, professor of retail practice at Syracuse University, told Fox Business.
The company has been shedding its last remaining valuable brands in recent years.
Even though they've mounted in recent years, the company isn't limiting itself to store closures in order to keep the lights on. In 2019, Lampert also offloaded the store's in-house DieHard car battery brand to vehicle repair supply store Advance Auto. The company also shut down the last remaining 15 Sears Auto Center stores in January of this year, Fox Business reports.
Other storefronts are finding new life as other projects in the hands of developers. The company has sold some of its uniquely large spaces to be remodeled into self-storage units, apartments, medical office parks, and education spaces, The New York Times reported.
These are the only remaining Sears locations in the U.S.
But according to Widmer, the current operation may be too stripped of parts to have any hopes of running long into the future, he told Fox Business. He likens the store's current state to other recent examples of retail implosions, meaning it's more likely that the store's all-but-vanished footprint makes it an unenticing offer to any potential buyers who could help it avoid ultimately dying off.
Not including Hometown Stores, there are only 22 stores left spread out across the U.S., according to BroStocks. For now, there are full Sears stores in Burbank, Concord, Stockton, and Whittier, California; Miami, Orlando, and Palm Beach Gardens, Florida; Frederick, Maryland; Braintree, Massachusetts; Jersey City, New Jersey; Greensboro, North Carolina; Camp Hill, Pennsylvania; Tukwila and Union Gap, Washington; and San Juan, Puerto Rico. The company also still operates several of its Home & Life stores in Anchorage, Alaska; Overland Park, Kansas; and Lafayette, Louisiana.
The company is also down to its last four Appliance & Mattress locations. The remaining stores are in Fort Collins, Colorado; Honolulu, Hawaii; and El Paso and Pharr, Texas.