Can retail be rescued? Why so many U.S. stores are closing
It looked like Christmas inside Sears at Boise Towne Square on Monday, only the mood inside was anything but festive.
On the day when Sears announced it had filed bankruptcy and will close 142 unprofitable stores before the end of the year, including the Boise store, shoppers were greeted by a bulletin board covered with fliers seeking holiday workers, and by a floor display filled with artificial Christmas trees.
A store worker said he was instructed not to talk about the bankruptcy or the store closure. The store’s manager said she could not comment either, and referred a reporter to a corporate spokesman outside Chicago. His voicemail box was full and he did not reply to an email sent Monday morning.
Sears filed for Chapter 11 bankruptcy protection, buckling under its massive debt load and staggering losses. The closures, which affect both Sears and Kmart stores, are in addition to the closure of 46 stores announced previously. Liquidation sales are expected to begin soon.
The bankruptcy does not affect the Sears Outlet store at 8033 W. Franklin Road in Boise or Sears Hometown stores in Nampa, Mountain Home and Ontario. Those stores and seven others in Eastern and Northern Idaho are independently owned and license the Sears name, selling appliances, furniture and electronics.
“The Sears Outlet stores and the Hometown stores are totally independent, and they’ve been broken off from Sears since about 2012,” said Richard Valverve, a sales associate at the Boise Outlet store. “We’re not at any risk for bankruptcy whatsoever.”
Sears, with 110,000 square feet on two floors, was one of four anchor tenants when Boise Towne Square opened in October 1988. Another anchor, Mervyns, closed its doors in late 2008, leaving J.C. Penney and Macy’s as the remaining anchors.
“This is really sad news,” said Boise resident Nicki Heathman Heckenlively. “I still shop at Sears for kids’ stuff.”
Sears has a long history in Idaho, first registering with the Secretary of State’s Office in 1928. It operated a store that year in the Alexander Building at 9th and Main streets. By 1930, it was operating a block north, at 9th and Idaho Street.
Longtime Treasure Valley residents remember Sears at 1215 W. State St., where the Idaho State Insurance Fund now operates, for several decades before the Boise Towne Square store opened. Statesman archives list Sears there as far back as 1949.
Emmett resident Lois Russell said she remembers going to the State Street store when she was growing up.
“Mom hated the mall, but she would go because it was the place she bought her girls dresses and they carried Stanley tools,” Russell said.
When the Towne Center store closes, it will leave a store and auto center in Idaho Falls as the only company-owned Sears store in the state.
The last of five Treasure Valley Kmart stores closed in August in Nampa. It followed the closure of the store at 10477 W. Fairview Ave. in Boise in March 2016.
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, 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.
“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “Hopefully, a smaller new Sears will be healthier.”
Others don’t share Johnson’s optimism.
“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,” said Neil Saunders, managing director of GlobalData Retail, in a note published Monday. “In our view, too much rot has set in at Sears to make it viable business.”
The company has struggled with outdated stores and complaints about customer service even for its once crown jewels: major appliances like washers and dryers. That’s in contrast with chains like Walmart, Target, Best Buy and Macy’s, which have been enjoying stronger sales as they benefit from a robust economy and efforts to make the shopping experience more inviting by investing heavily in remodeling and de-cluttering their stores.
Edward S. Lampert, Sears’ 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 that it has secured $300 million in financing from banks to keep 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.
In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets, like Kenmore, through his hedge fund as a $134 million debt repayment came due on Monday. Lampert personally owns 31 percent of the company’s shares, while his hedge fund has an 18.5 percent stake, according to FactSet.
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.
In a March 2017 government filing, Sears said there was “substantial doubt” it would be able to keep its doors open — but insisted its turnaround efforts would mitigate that risk.
Sales at the company’s established locations tumbled nearly 4 percent during its fiscal second quarter. Still, that was an improvement from the same period a year ago. Total revenue dropped 30 percent in the most recent quarter, hurt by continued store closings.
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.
Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing landlords to its tens of thousands of workers.
Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., following earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands’ End.
Sears workers are nervous about what kind of severance they’ll receive if their stores close.
John Germann, 46, works full-time and makes $14 per hour as the lead worker unloading refrigerators, treadmills and other merchandise from trucks at the Chicago Ridge, Illinois, store, which has been drastically reducing its staff since he started nine years ago. Germann now has 11 people on his team, compared with about 30 a few years ago.
“We’re doing the job of two to three people. It’s not safe,” he said.