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Sears Holdings

  (Redirected from Sears Holdings Corporation)

Sears Holdings Corporation is an American holding company headquartered in Hoffman Estates, Illinois. It is the parent company of the chain stores Kmart and Sears, and was founded after the former purchased the latter in 2005.[2] It was the 20th-largest retailing company in the United States in 2015,[3] and filed for Chapter 11 bankruptcy on October 15, 2018.[4]

Sears Holdings Corporation
Public
Traded as
IndustryRetail
Genre
FateChapter 11 bankruptcy (October 2018)
Predecessor
  • Kmart Corporation
    (1977–2004)
  • Sears, Roebuck and Co.
    (1892–2004)
FoundedMarch 24, 2005; 13 years ago (March 24, 2005)[1]
Headquarters3333 Beverly Road, ,
US
Areas served
  • United States
  • Puerto Rico
  • Guam
Key people

Office of the CEO:

  • Leena Munjal (Chief Digital Officer)
  • Greg Ladley (President of Apparel and Footwear)
  • Robert A. Riecker (Chief Financial Officer )
RevenueDecrease US$ 16.702 billion (FY2018)[1]
Decrease - US$ 1.434 billion (FY2018)[1]
Increase - US$ 383 million (FY2018)[1]
Total assetsDecrease US$ 7.262 billion (FY2018)[1]
Total equityIncrease - US$ 3.723 billion (FY2018)[1]
Number of employees
89,000 (2018)[1]
Subsidiaries
Websitesearsholdings.com

Contents

HistoryEdit

2004–2005: FormationEdit

On November 17, 2004, the management of Kmart Holding Corporation announced its intention to purchase Sears, Roebuck and Co under a new corporation. Kmart previously emerged from Chapter 11 bankruptcy protection on May 6, 2003. The new corporation became known as Sears Holdings Corporation, simply known as Sears Holdings. The new corporation announced that it would continue to operate stores under both the Sears and Kmart brands. The merger of Kmart and Sears closed on March 24, 2005, following affirmative shareholder votes of both companies. The result of the merger was Kmart and parent Kmart Holding Corporation and Sears became subsidiaries of the new Sears Holdings Corporation. Sears Holdings now operates Sears and Kmart stores. The company continues to market products under brands held by both companies.

The two companies cited several reasons for combining forces:

  • Sears had begun investing in new, larger off-mall stores, called Sears Grand. Earlier in the year, Sears had purchased dozens of current Super Kmart locations; the merger permitted the combined company to accelerate that process.
  • Proprietary brands held by both companies could be made more accessible to their target demographics by leveraging their combined real estate holdings. This was estimated to be an expected $200 million a year in revenue synergies.
  • At least $300 million a year in cost savings was expected annually, particularly in the supply chain and in administrative overhead.
  • The establishment of a shared customer-focused corporate culture between the two companies was estimated to yield improvements in revenue per unit area.
  • Preservation of two brands after the merger was intended to allow Sears Holdings to continue focusing on different customer demographics, without alienating either group.

The company is directed by a board of directors composed of members from the two companies: seven members from Kmart's board, and three from Sears. Shareholders in the Kmart Holding Corporation received one share in the new company. Shares of Sears, Roebuck and Company stock were converted into a combination of 55 percent stock and 45 percent cash (at $50 a share). Stockholders had a choice of receiving either stock or cash, subject to the predefined ratio.

The merger was completed on March 24, 2005, after receiving regulatory approval from the government and approval by shareholders of both companies.

2005–2009Edit

 
The exterior of a typical Sears Essentials store.

Sears Holdings continues to operate stores under the Sears and Kmart mastheads. In 2005, Sears introduced a new store format called Sears Essentials. As part of this new store format, some Kmart stores were converted to Sears Essentials, as well as a few locations that were acquired from Walmart and several bankrupt discount retailers. The new store format combined the Sears store concept with the Kmart format, which was intended to help the company better compete with Walmart and Target. The project has since been resigned, and merged with the Sears Grand concept.

Sears Holdings has begun cross-selling merchandise between its two brands. For example, Craftsman tools are now available in Kmart stores; they were previously exclusive to the Sears brand. However, Martha Stewart brand paint colors were discontinued at Sears.

Sears Holdings owned 51 percent of Sears Canada,[5] a large department store chain in Canada similar to the U.S. stores. At one point it owned as much as 92% of the Canadian company,[6] but it failed in 2006 to buy the remainder of Sears Canada that it did not own because Bill Ackman took a 17.3 percent stake in it and prevented any takeover. He accepted to sell his stake at $30 a share on April 23, 2010[citation needed].

Sears Holdings also owns 20 percent of Sears Mexico; Carlos Slim owns the other 80 percent. Like Target stores, Kmart-branded stores in Australia belong to Wesfarmers (which acquired former owners Coles Group in 2007); Wesfarmers also holds the rights to the Kmart brand in New Zealand.

In 2005, Sears Holdings sold a stake in hardware chain Orchard Supply Hardware to private equity firm Ares Management. On December 14, 2011, Sears Holdings announced that it would spin off its remaining holdings in Orchard Supply to shareholders effective December 30, 2011.[7]

In November 2006, speculation rolled around as The Chicago Sun Times reported that Sears may buy Safeway, Home Depot, Gap, BJ's Wholesale Club, Radio Shack, Pep Boys, and Anheuser-Busch.[8] The Washington Post, in a March 11, 2007, article, described the current Sears as a hedge fund with money being diverted from the maintenance and improvement of stores to non-retail financial investments. A former executive was quoted as saying the company faced an "uncertain future". Surprisingly, a third of pre-tax income in the third quarter of 2006, according to The Washington Post, was due to financial trades and not the retail business. However, these investments performed poorly in the fourth quarter.[9]

In 2007, the company placed its three major brands in KCD IP, a "separate, wholly owned, bankruptcy-remote subsidiary". KCD stands for the three brands: Kenmore, Craftsman, and DieHard. KCD IP then issued $1.8 billion in bonds that were sold to Sears' insurance subsidiary based in Bermuda. Sears would thus pay KCD for use of the three brands' trademarks.[10]

On December 14, 2007, the company submitted a draft merger agreement to buy Restoration Hardware for $6.75 a share. Sears already owned 13.7 percent of the company.[11] That offer was withdrawn after Restoration's shares tumbled and a competing bid from private equity firm Catterton Partners was lowered to $4.50 per share. On February 28, Sears Holdings made an offer of $4.55 a share.

In June 2008, Sears launched Servicelive.com, which was intended to connect Sears customers with local contractors for home improvement projects. The site charges 10 percent of the contract price for each completed service, and offers more than 40,000 contractors. Servicelive.com was redesigned in March 2010.[12] In 2010, Dennis Stemmle was appointed president of the division.[citation needed]

2010–2014Edit

On February 22, 2010, the Sears Automotive business launched a new Independent Sears Auto Center franchise program that offers automobile dealers the opportunity to operate licensed Sears Auto Centers, with the first dealership in New Jersey.[13]The company has faced consistent quarters of decline since the merger of Sears, Roebuck and Co. and Kmart Corp in 2005, the first year of results for the merged company. Income plunged 84 percent from $858 million, or $6.17 per diluted share from 2005 to 2011.[14] Eddie Lampert has held the title of chairman of Sears Holdings over the period of decline. The first quarter of 2011 did not appear any better, with the company posting a net loss of $170 million, or $1.58 a share. Some industry analysts feel the heart of the problem is Eddie Lampert's "penny-pinching" cost-savings by stifling investment into stores. Instead the company has been buying back stock and increasing its presence online.[15]

The company closed a number of stores between 2011 and 2013. On December 27, 2011, after poor holiday sales, the company announced 100 to 120 Sears and Kmart stores would close.[16] On February 23, 2012 Sears Holdings Corp. announced it is closing all nine "The Great Indoors" stores.[17] On December 6, 2013 Sears Holding Corp. announced that it will spin off Lands' End catalog business as a separate company by distributing stock to the retailer's stockholders.[18] Lands' End stock began trading on the NASDAQ on April 7, 2014.[19]

2015–presentEdit

In 2015, it was reported that Sears Holdings was planning to spinoff 235 of its properties into a new REIT to be called Seritage Growth Properties, with the package of properties backed by a $925 million loan from JP Morgan Chase Bank. The 235 properties, mainly Sears and Kmart locations spread across the country and Puerto Rico, amounted to a total of 37.1 million square feet of space.[20] The strategy of department stores converting their real estate holdings into REITs has been well-used in the current commercial real estate environment.[20]

In May 2016, Sears Holdings announced that it was seeking strategic alternatives for its house brands to increase their revenue, including expanding their presence outside of Sears and Kmart. The filing stated that "by evaluating potential partnerships or other transactions that could expand distribution of our brands and service offerings, we can position both businesses to achieve greater success."[21]

In late 2016 and early 2017, some significant steps were taken by Edward Lampert, president, chief executive officer and top shareholder of Sears Holding Corp. Lampert, with personal assets estimated at $2 billion, is also the founder and manager of the hedge fund ESL Investments Inc.[22] He provided an additional loan of $500 million to the company and said he would provide letters of credit to Sears for additional amounts, reportedly totaling $200 million and possibly increasing to a half billion dollars in the future.[23] During this period, the company announced that it would close 150 stores (109 Kmart and 41 Sears outlets), in an attempt to cut its losses after a decline in sales of 12 to 13 percent during the holiday shopping season and the largest quarterly loss since 2013.[24] On January 9, 2017, Sears announced that it had reached an agreement to sell the Craftsman brand to Stanley Black & Decker for $900 million, plus royalties on new Craftsman sales for a 15-year period. During this period, Sears will continue selling Craftsman products royalty-free under a licensing agreement.[25]

As part of an effort to extend the brand, Sears launched a pilot location in San Antonio for a DieHard-branded auto service franchise, DieHard Auto Center driven by Sears Auto. The brand is intended to operate as a standalone version of the Sears Auto Center locations attached to Sears department stores; the location was chosen because it was in proximity to a Sears location that had closed.[26] In December 2017, the Wall Street Journal reported that Sears Holdings Corp. had not paid for any national television commercials since late November 2017, for both Kmart and Sears, instead relying on online marketing.[27]

On January 4, 2018, Sears Holdings announced it would shutter 103 unprofitable Kmart and Sears stores, after 24 quarters of sales declines.[28] These stores would be closing by April 2018, leaving Sears Holdings with 555 stores.[29]According to an op-ed in MSN money, at this rate, Sears along with sister company Kmart, has an extremely high chance of disappearing and going defunct in 2018, and that 2017 will have marked its final holiday season as an independent brand.[30][31]

On January 14, 2018 their Canadian unit, Sears Canada, ceased operations with all stores closed.

On March 15, 2018, Sears Holdings announced a small profit was made in quarter 4 of 2017. However, investors are claiming that this is due to tax refunds and that sales are still falling for both Kmart and Sears.

On September 11, 2018, the company stated it would announce its quarter 2 earnings when the market opened on September 13.[32] After missing the deadline, the company announced at the end of the business day that it had lost $508 million, though same-store sales showed some improvements. [33] The following day, Lampert blamed the losses on the company's difficulties in paying pensions and the resulting regulatory penalties. [34]

On September 28, 2018, Sears Holdings began selling at less than a dollar per share, risking delisting by NASDAQ. [35]

2018 bankruptcyEdit

On October 10, 2018, it was reported that Sears Holdings had engaged advisors regarding an imminent bankruptcy filing.[36][37] The company filed for Chapter 11 bankruptcy protection on October 15, 2018 in New York; the same day that a $134 million debt payment was due,[38] and will close 142 stores, including 63 Kmart stores and 79 Sears stores. All other Kmart and Sears stores are staying open to turn the company around. Their online stores sears.com, kmart.com, and shopyourway.com are also staying open to serve members affected by the store closures.[39] On the same day, Lampert announced that he was stepping down as CEO, remaining Chairman of the Board. He also announced that CFO Robert A. Riecker, CDO Leena Munjal, and apparel and footwear segment president Greg Ladley would collectively share the responsibilities of CEO in his place.[40] It was delisted from NASDAQ on October 24, 2018[41] and became listed on OTC Pink. On November 8, 2018, Sears Holdings announced it would close an additional 40 Kmart and Sears stores.[42] On November 23, 2018, Sears Holdings released a list of 505 stores, including 239 Kmart stores and 266 Sears stores, that are for sale in the bankruptcy process while all others are currently holding liquidation sales.[43]

FinancesEdit

Year Revenue
in mil. USD$
Net income
in mil. USD$
Total Assets
in mil. USD$
Employees Stores
2006 49,455 857 30,467 355,000 3,843
2007 53,016 1,492 29,906 352,000 3,791
2008 49,867 812 27,497 337,000 3,791
2009 46,007 295 25,444 324,000 3,862
2010 43,360 218 24,901 322,000 3,862
2011 42,664 122 24,360 312,000 3,949
2012 41,567 −3,113 21,381 293,000 4,010
2013 39,854 −930 19,340 274,000 2,548
2014 36,188 −1,365 18,261 249,000 2,429
2015 31,198 −1,682 13,209 196,000 1,725
2016 25,146 −1,129 11,337 178,000 1,672
2017 22,138 −2,221 9,362 140,000 1,430
2018 16,702 −383 7,262 89,000 1,002

SubsidiariesEdit

CurrentEdit

  • Kmart division
    • Kmart – a chain of discount stores that are usually free-standing or located in strip malls. They carry most standard department store stock as well as a limited selection of grocery items.
    • Big Kmart – a sub-chain of Kmart that uses a hypermarket model, carrying an expanded inventory. Big Kmart stores range from 84,000 to 120,000 sq ft (7,800 to 11,100 m2). Since the merger with Sears, many stores have been rebranded simply to Kmart.
    • K-Fresh – a new format that was implemented in several Super Kmart locations, which extended the grocery section into a store-witin-a-store model.
    • mygofer – an hybrid-online retail concept launched in spring of 2009, where products are ordered ahead of time and then are either shipped to the customer or held at a local Kmart for the customer to pick up.
 
An older Sears exterior with newer signage at Hawthorn Mall in 2006. This location closed in September 2018.
  • Sears division
    • Sears – a chain of department stores that are usually located in shopping malls. There are a few freestanding locations. These stores carry traditional, middle-class priced department store items as well as an expanded appliance and tools section.
    • Sears Grand – a sub-chain of hypermarkets typically located away from shopping malls. Many Sears Grand locations are retrofit remodels of existing Kmart stores. They carry an expanded inventory, and can range from 165,000 to 210,000 square feet (15,300 to 19,500 m2).
    • Sears Home Services – a division of Sears that specializes in appliance repair, lawn and garden services, HVAC service, as well as most in home services. Sears Home Services can also do repair on small appliances in-store.
    • Sears PartsDirect – a chain of lawn-and-garden equipment and appliances parts stores. Some stores, branded as Sears Parts and Repair Centers, feature a carry-in point for customers to bring merchandise in that needs to be repaired either in- or out-of- warranty.
    • Sears Vacations – an online travel and booking agency owned in partnership with International Cruise & Excursions, Inc.
  • Other subsidiaries
    • Shop Your Way – a customer loyalty program shared between all subsidiaries.
    • A&E Factory Service – a joint venture held by Whirlpool and Sears Holdings that performs mobile appliance repairs.
    • Wally Labs – a subsidiary created when Sears Holdings purchased the rights to WallyHome sensor technology from SNUPI Technologies in 2015.
    • Monark Premium Appliances – a nationwide distributor of home appliances.

FormerEdit

  • Sears Hometown and Outlet Stores – a subsidiary of Sears that operated a series of more specialized department stores. In 2012, these stores were spun off into an independent company.
    • Sears Hometown (formerly Sears Dealer Store) – a chain of smaller, free-standing stores located in smaller markets that did not support full-sized Sears stores. These locations primarily concentrated on hardware, appliances and lawn-and-garden supplies.
    • Sears Outlet – an outlet version of Sears department stores located in various retail locations across the U.S. and Canada. These stores carried new, one-of-a-kind, out of carton, discontinued, used, scratched, and dented merchandise at discount.
    • Sears Appliance & Hardware/ Sears Appliance Outlet – a chain of free-standing hardware stores.
    • Sears Home Appliance Showrooms – a subchain of sears that focused on home appliances and related services.
    • Sears Fashion Outlet – a fashion-only version of Sears Outlet.
  • Lands' End – a line of business-casual clothing, sold both at Sears in a store-within-a-store model as well as in standalone stores.
  • Defunct Subsidiaries
    • Kmart Super Center – the predecessor to Big Kmart, with a similar model. The last Super Kmart was located in Warren, Ohio and it closed on April 8, 2018.[44]
    • Sears Essentials – the predecessor to Sears Grand, with a similar model.
    • Orchard Supply Hardware – a chain of free-standing hardware stores, which averaged 28,000 square feet. Stores carried home repair, hardware products and lawn and garden supplies, found primarily in California. It was owned by Sears from 1996-2012, and was later absorbed into Lowe's.
    • The Great Indoors – a chain of free-standing home-décor stores that carry high-end appliances, bedding, and kitchen-and-bath fixtures. This chain was closed in 2012.

See alsoEdit

ReferencesEdit

  1. ^ a b c d e f g "2015 Form 10-K, Sears Holding Company" (PDF). Sears Holdings.
  2. ^ Barbash, Fred; Barbaro, Michael (November 17, 2004). "Sears, Kmart To Merge in $11B Deal". The Washington Post. Retrieved May 23, 2010.
  3. ^ "Top100 Table". nrf.com. National Retail Federation.
  4. ^ Corkery, Michael. "Sears, the Original Everything Store, Files for Bankruptcy".
  5. ^ "Are Sears Canada's days numbered? Poor results could have U.S. retailers circling soon".
  6. ^ "Sears to buy additional interest in Sears Canada". BusinessWeek. The Associated Press. April 23, 2010. Archived from the original on February 1, 2016. Retrieved 5 January 2018.
  7. ^ "Sears Holdings Press Releases". Searsholdings.com. Retrieved 2012-03-08.
  8. ^ "Sears May Have Eye on Safeway". Chicago Sun-Times.
  9. ^ "Risky Side of Sears: Retailer Is Recast as a Hedge Fund, as Sales and Stores Decline, Chairman Focuses on Investment". The Washington Post. March 11, 2007.
  10. ^ "The New Alchemy At Sears". BusinessWeek. April 16, 2007. Retrieved 4 August 2011.
  11. ^ "Sears Takes 13.7% Stake in Restoration Hardware". finanznachrichten.de.
  12. ^ Much, Marylin (March 18, 2010). "Sears Updates Its Online Marketplace ServiceLive.com". Investor's Business Daily. Archived from the original on July 13, 2011. Retrieved April 13, 2010.
  13. ^ "Sears Starts Auto Center Franchise Program". February 22, 2010. Retrieved February 23, 2010.
  14. ^ "'Twin Titanics' or Turnaround – Which Way Are Sears and Kmart Headed?". May 5, 2011. Archived from the original on May 10, 2011. Retrieved May 30, 2011.
  15. ^ Jones, Sandra M. (May 19, 2011). "Sears Holdings Posts $170 Million Loss in 1st Quarter". Chicago Tribune. Retrieved May 30, 2011.
  16. ^ "More than 100 Sears, Kmart stores to close". News & Record. Associated Press. 2011-12-27. Retrieved 2011-11-27.
  17. ^ Sandra M. Jones. "Sears closing all nine Great Indoors stores". Chicago Tribune. Retrieved 23 February 2012.
  18. ^ Hadley Malcolm, "Sears to spin off Lands' End business," USA Today, December 6, 2013.
  19. ^ "Lands' End Starts Trading as Public Company". ABC News. Associated Press. April 7, 2014.
  20. ^ a b "Sears Retains Right To Exit Nearly Half of its Store Space in REIT Spinoff - CoStar Group". www.costar.com. Retrieved 2015-12-13.
  21. ^ "Sears brand expansion: It seeks DieHard jolt, hopes to clean up with Kenmore". Chicago Tribune. Retrieved 22 February 2017.
  22. ^ "Profile: Edward Lampert". Forbes. Forbes. January 9, 2017. Retrieved January 9, 2017. ...took over as Sears CEO in 2013 ... has presided over a remarkable dismantling.
  23. ^ Sweeney, Brigid (January 5, 2017). "With Craftsman sale, Sears takes another step toward the grave". Crain's Chicago Business. Retrieved January 9, 2017. The company may need $2.5 billion in cash to get through 2017 amid sales declines and store closures, including almost $600 million in minimum pension contributions.
  24. ^ Coleman-Lochner, Lauren (January 5, 2017). "Sears to Sell Craftsman, Shut 150 Stores as Lampert Raises Cash". Bloomberg. Bloomberg L.P. Retrieved January 9, 2017. Investors cheered the moves, sending Sears up as much as 8 percent to $11.19 in New York. The stock had slumped 55 percent last year as the company continued to post losses.
  25. ^ Merced, Michael J. De La (January 5, 2017). "Sears Agrees to Sell Craftsman to Stanley Black & Decker to Raise Cash". The New York Times. Retrieved February 22, 2017.
  26. ^ "Sears launches free-standing pilot DieHard Auto Center". Automotive News. Retrieved 22 February 2017.
  27. ^ "Sears Stopped Buying National TV Ads in Critical Holiday Season". Wall Street Journal. December 31, 2017. Retrieved December 31, 2017.
  28. ^ Reuters (January 4, 2018). "Sears Holdings to Close 103 Kmart and Sears Stores". The New York Times. Retrieved January 6, 2017.
  29. ^ "Store Closures (1/4/18)" (PDF). searsholdings.com. Sears Holdings.
  30. ^ Douglas A. McIntyre (December 18, 2017). "10 brands that will disappear in 2018:Sears". MSN. Retrieved 5 January 2018.
  31. ^ Douglas A. McIntyre (December 18, 2017). "10 brands that will disappear in 2018:Kmart". MSN. Retrieved 5 January 2018.
  32. ^ Butler, David (12 September 2018). "Sears Is Finally Revealing Earnings". Seeking Alpha.
  33. ^ Isidore, Chris. "Sears built the suspense, then reported another bad quarter". CNNMoney. Retrieved 2018-09-14.
  34. ^ Isidore, Chris. "What's killing Sears? Its own retirees, the CEO says". CNNMoney. Retrieved September 14, 2018.
  35. ^ Lauren Thomas. "Sears Holdings shares fall below $1 as key debt deadline nears, stock risks being delisted". CNBC.
  36. ^ Lauren Hirsch; Lauren Thomas (9 October 2018). "Sears reportedly preparing for bankruptcy filing as soon as this week". CNBC.
  37. ^ "Sears prepares to file for bankruptcy in coming days: sources". Reuters. Retrieved October 10, 2018.
  38. ^ "Sears, the Original Everything Store, Files for Bankruptcy". Retrieved 2018-10-15.
  39. ^ "Sears files for Chapter 11 bankruptcy protection, to close 142 more stores". USA TODAY. Retrieved 2018-10-15.
  40. ^ "'I've decided to step down as CEO': Eddie Lampert sends email to Sears employees after the company files for bankruptcy". Business Insider. Retrieved 2018-10-15.
  41. ^ "Another Sears death knell: Stock delisted from Nasdaq". New York Post. 2018-10-24. Retrieved 2018-11-02.
  42. ^ Hirsch, Lauren Thomas, Lauren (2018-11-08). "Sears to shut 40 more stores early next year". CNBC. Retrieved 2018-11-08.
  43. ^ Researcher, WYCO (2018-11-23). "List Of Sears Stores To Be Sold And Other Bankruptcy Developments". Seeking Alpha. Retrieved 2018-11-25.
  44. ^ https://www.youtube.com/watch?v=yPp_GTXTSQM

Further readingEdit

  • Katz, Donald R. (1987) The Big Store – Inside the Crisis and Revolution at Sears Viking Press (New York City)
  • Martinez, Arthur C. (2001) The Hard Road to the Softer Side: Lessons from the Transformation of Sears Crown Business (New York City)
  • Stevenson, Katherin Cole, and Jandl, H. Ward, (1995) Houses By Mail: A Guide to Houses from Sears, Roebuck and Company John Wiley & Sons; Hoboken, New Jersey
  • Turner, Marcia L. (2003) Kmart's Ten Deadly Sins – How Incompetence Tainted an American Icon John Wiley & Sons; Hoboken, New Jersey

External linksEdit