Sears filed for Chapter 11 bankruptcy protection Monday, buckling under its massive debt load and staggering losses.
The question now is whether a smaller version of the company that once towered over the American retail landscape can remain viable or whether the iconic brand will be forced out of business.
Sears Holdings, which operates both Sears and Kmart stores, will close 142 unprofitable stores near the end of the year, with liquidation sales expected to begin shortly.
Sears in St. Clair Square in Fairview Heights will remain open. The metro-east’s nearest Kmart, in the Flower Valley Shopping Center in Florissant, Missouri, will close.
Four Sears stores in Illinois are on the closure list, but none are in the metro-east.
That’s in addition to the closure of 46 unprofitable stores that had already been announced. Edward S. Lampert, the company’s largest shareholder, has stepped down as CEO but will remain chairman of the board. A new Office of the CEO will be responsible for managing day-to-day operations.
The company said Monday it has secured $300 million in financing from banks to keep the operations going through bankruptcy. In addition, it’s negotiating an additional $300 million loan from Lampert’s ESL Hedge fund.
The filing listed between $1 billion and $10 billion in assets while liabilities range between $10 billion to $50 billion.
Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred huge losses over the years.
Sears joins a growing list of retailers that have filed for bankruptcy or liquidated in the last few years amid a fiercely competitive climate. Some, like Payless ShoeSource, successfully emerged from reorganization in bankruptcy court. But plenty of others like Toys R Us and Bon-Ton Stores Inc., haven’t. Both retailers were forced to shutter their operations this year soon after Chapter 11 filings.
Sears’ stock has fallen from about $6 over the past year to below the minimum $1 level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around $141. The company, which once had 350,000 workers, has seen its workforce shrink to fewer than 90,000 people as of earlier this year.
As of May, it had fewer than 900 stores, down from a 2012 peak of 4,000.
Chairman Edward Lampert is stepping down immediately from his role as CEO, a post he has held since 2013, and the company plans to close 142 unprofitable stores near the end of the year, in addition to the 46 stores it had already identified. The company did not specify whether the closings would be Sears or Kmart stores or their locations. Three executives will be responsible for managing the company’s day-to-day operations in an office of the CEO.
The chapter 11 bankruptcy filing comes 131 years after Richard Sears moved his business to Chicago, where the watch company would grow to become a retail empire that gave the city its tallest building, employed hundreds of thousands of people and mesmerized children everywhere with its annual Christmas Wish Book catalog. Sears was once the country’s biggest retailer, the go-to destination for everything, from Toughskins jeans to Craftsman tools, Kenmore washing machines, Allstate insurance and Discover credit cards.
Under the bankruptcy court’s protection, Hoffman Estates, Ill.-based Sears buys more time for a turnaround, one it’s been attempting for years. Despite efforts to cut costs by closing hundreds of stores, Sears has lost more than $11 billion since 2011. In the last two years alone, the company has closed more than 725 Sears and Kmart stores.
Shortly after the bankruptcy filing was made early Monday, the company said it has arranged $300 million in debtor-in-possession financing, which will allow it to continue operating the business and paying employees while it tries to restructure around a smaller group of stores. Sears also said it is negotiating an additional $300 million in financing from hedge fund ESL Investments, the company’s largest shareholder and run by Lampert.
Lampert’s ESL also is in talks to purchase “a large portion of the company’s store base,” and other company assets will be put up for sale in the coming months, Sears said in a news release.
The filing, made in U.S. Bankruptcy Court for the Southern District of New York, lists total assets as $6.937 billion and total debts as $11.339 billion as of Aug. 4.