Sears filed for Chapter 11 bankruptcy early Monday morning after a multiyear battle to stay afloat amid steep declines in sales and customer traffic.
The company said that it would close 142 stores before the end of the year and that Eddie Lampert would step down as CEO while remaining the company’s chairman.
The more than 125-year-old company, once the most iconic retailer in America, has seen its sales cut in half since 2014. It has been burning through cash, closing hundreds of stores and slashing jobs in an attempt to stanch the bleeding.
“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” Lampert said in a statement on Monday.
“While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.”
Lampert said that Sears and Kmart stores would “remain open for business” into the holiday season and that the bankruptcy process would allow the chain to “strengthen its balance sheet” to “accelerate its strategic transformation” and ultimately to “return to profitability.”
For years, Lampert has kept the ailing retailer afloat through billions of dollars in loans from his hedge fund, ESL Investments, the selling off of valuable real estate, and the slow dismantling of Sears’ exclusivity over some big American brands.
He has said these measures will buy Sears more time to execute a transformation that will lead the company back to profitability.
But analysts are skeptical that the company can make a comeback following years of underinvestment in stores.
“The problem in Sears’ case is that it is a poor retailer. Put bluntly, it has failed on every facet of retailing from assortment to service to merchandise to basic shop-keeping standards,” said Neil Saunders, the managing director of GlobalData Retail. “That failure has manifested itself in lost customers, lost market share, and a brand that has become tarnished and increasingly irrelevant.”
Lampert’s critics — including some former Sears executives— have also blasted him for managing a company in crisis from afar, visiting Sears’ headquarters only about once a year for the annual shareholder meeting.
Instead, Lampert prefers to work from an office in Bay Harbor Islands, Florida, just north of Miami Beach, and communicate with employees primarily through teleconference meetings.
As sales have tumbled from $53 billion in 2006 to less than $17 billion last year, Sears has closed hundreds of stores, reducing its total locations to 866 stores as of September 13, down from 1,980 stores in 2013.
Some stores have suffered severe decay, such as crumbling walls, cracked floors, collapsing ceilings, and a lack of working toilets for weeks on end, according to store visits and interviews with Sears employees over the past two years.
In addition to maintenance problems, some stores feature barren shelves and empty floors, most likely the result of suppliers exacerbating Sears’ problems by threatening to cancel contracts and demanding new payment terms for orders.
Some stores have started hanging bed sheets and shower curtains from the ceiling to cover empty areas. The company has also introduced handwritten pricing signs in an apparent effort to slash costs.
Lampert responded to the supplier troubles last year by blaming the news media in a rare interview and publicly threatening to sue two of its top tool vendors.
He has also defended his investment strategy in stores.
“I was criticized for not investing enough in the stores,” Lampert said in 2013. “My point of view is we couldn’t invest in everything.”
Some loyal shoppers are lamenting the loss of what was once America’s most iconic retailer.
“I’ll never understand why Sears was allowed to flounder for so many years,” a Sears shopper named Robert Moon told Business Insider this week.
“Sears was the number one retailer in the world” and “the industry pioneer in catalog purchases,” he said. “They could have been pioneers in online purchasing. It could be Sears instead of Amazon.”