Sears: Downfall of a Giant - Suffering From Fundamental Problems, Sears Nears Bankruptcy

The end of Sears has been predicted by retail analysts for a long time. Not long after Kmart and Sears merged to create the Sears Holdings Corporation in 2004, revenues began to slide and have been doing so at gathering speeds ever since 2007.

Key Questions Answered:

- What impact did the merger have on business?

- Can the company ever be turned around?

- Why is investment in stores necessary?

- Was selling of assets correct?

- How much is the CEO to blame for a decline in fortunes?

Scope

Many factors are responsible, but most fundamentally the company is not being run in a way conducive to survival, even though potential escape routes exist. Many problems can be traced back to the CEO, Eddie Lampert.

Failure at the top of the company to summon suitable solutions to longstanding problems is the most fundamental of them all. Sears remains a trading company, for now. Unless radical action is taken very soon the brand will soon cease to exist altogether.

Key Highlights

- The creation of Sears Holdings Corporation by the merger of struggling retailer Kmart with Sears (although in effect the deal was a Kmart takeover of Sears) was supposed to provide both retailers with economies of scale and integration of products to compete against Walmart and other firms.

- How the company is organized exacerbates the problem further. Shortly after Lampert took over, each business unit was organized to function as an autonomous company would do.

- Most observers of Sears have struggled to discover potential means of the company being saved from expiring ever since it was formed.

Reasons to buy

- Assesses the impact of the Kmart and Sears merger.

- Looks at the role of CEO in the company.

- Examines the financial situation the company is in.

- Examines the current strategies in place.

- Assesses the need for store investment.

- Looks at potential rescue plans.

Table of Contents

Table of Contents

Overview 2

Catalyst 2

Summary 2

Creation of Sears Holdings Corporation has not matched predictions of success 6

Original merger deal had ...

Table of Contents

Overview 2

Catalyst 2

Summary 2

Creation of Sears Holdings Corporation has not matched predictions of success 6

Original merger deal had major failings from the beginning, exacerbating problems 6

Some analysists predicted failure; others anticipated success 7

Predictions of success were based upon sound reasoning, but proved to be wrong once reality bit 8

Eddie Lampert is failing as a CEO, thwarting any prospect of recovery 9

Management style is bad for decision making and lacks leadership 9

Lack of trust from CEO prevents suitable decision making processes from forming 10

Unwillingness among board members to remove Lampert is a big failure of leadership 11

financial situation of Sears reducing survival chances 12

Selling products on Amazon is forward thinking but scale is lacking in ambition 12

Valuable assets are not being managed correctly to benefit whole company 13

Sears has few assets remaining, deterring any potential deal to save core business 13

Investment in stores should have occurred before debt became crippling 15

Dwindling financial resources and poor strategy are hastening decline of Sears 15

Suppliers are reported to be nervous about supplying Sears 16

Perilous financial situation means large-scale investment in stores is highly unlikely 16

Despite dire circumstance, suitable turnaround plans could work 18

Sears Canada could have been saved according to former executive chairman 18

Public image of Sears needs to be restored for a turnaround to happen 19

Better use of assets is now essential to stave off bankruptcy 19

Reform of ‘Shop Your Way’ needed to convince customers change is coming 19

Conclusions 21

Riddled by problems, Sears will soon cease trading unless radical action is undertaken 21

Appendix 22

Sources 22

Further Reading 22

Ask the analyst 23

About MarketLine 23

Disclaimer 23

List of Tables

List of Tables

Table 1: Board members of Sears Holdings Corporation, 2017 10

List of Tables

Table 1: Board members of Sears Holdings Corporation, 2017 10

List of Figures

List of Figures

Figure 1: Sears and Kmart merger 6

Figure 2: Sears Holdings Corporation revenue ($bn) 2005 to 2017 7

Figure 3: Eddie Lampert ...

List of Figures

Figure 1: Sears and Kmart merger 6

Figure 2: Sears Holdings Corporation revenue ($bn) 2005 to 2017 7

Figure 3: Eddie Lampert 9

Figure 4: Sears and Amazon logos merged 12

Figure 5: Craftsman to be sold at Stanley Black & Decker 13

Figure 6: Sears Holdings Corporation profit/Loss ($m) 2005 to 2017 15

Figure 7: Sears store closing down 17

Figure 8: Brandon Stranzl, former executive chairman of Sears Canada 18

Figure 9: Sears ‘Shop Your Way’ 20

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