125 Year-Old Sears File for Bankruptcy

Sears, once the largest retailer in the world, is now facing bankruptcy. The company, which did not turn a profit since 2010 and was $134 million in debt, recently approached several banks to prepare for bankruptcy filing.

Sears Holdings filed for Chapter 11 bankruptcy protection on October 15, 2018. The company said that it would close 142 Sears and Kmart stores before the end of the year. Its CEO, Eddie Lampert, would step down as well.

Sears - A Retail Giant

Richard Warren Sears started a mail order watch business in 1886 called the 'R.W. Sears Watch Company'. Within the first year he met Alvah C. Roebuck, a watch repairman. The next year, they relocated the business to Chicago. Sears started off by selling watches, diamonds and jewellery. The company continued to do so until it noticed the stagnant and dormant retail market. It soon realised that there was absolutely nothing to stop it from selling anything and everything. Being a mail-order business, Sears gave the consumers the option to order whatever they wanted from the comfort of their homes, pay a fair price and enjoy the benefits of home delivery. As expected, Sears' sales exploded. If one bought a good Sears stock when the company went public in 1906, he would not need to work for the rest of his life.

This is how Sears became the biggest and the most well-known retailer in the world. However, as the 20th century came to a close, so did Sears' reign.

Sears - The Decline

In the 90s, Sears was surpassed by Walmart and Home Depot. These big-box competitors offered a better variety of products and services, better store locations and better after-sale services. The turn of the 21st century saw the world shift from traditional retailers to e-commerce. Sears, however, shot itself in the foot by not paying heed to any such changes. Strike one!

Instead of changing to meet the new reality, Sears took a step backward by merging with another trouble retailer, Kmart. On November 17, 2004, Sears Roebuck & Co. became the new Sears Holdings Corporation. At first, things were looking good for Sears as the combined company's profits peaked at $1.5 billion in 2006. However, things went south rather quickly. The company made no profit in 2010. In 2011 - 2016, the company lost $10.4 billion. Ouch, strike two!

In the meanwhile, other online and offline retailers such as Amazon and Walmart were drowning in profits, to say the least.

Instead of doing anything to fix this situation, Sears decided to sell its assets. Brilliant! In addition to not expanding its online presence, Sears decided to neglect its physical stores. While the other traditional retailers upgraded their stores, bought new stores in better locations and switched to modern store layouts, Sears just sat in there and waited for its sales to magically increase. Strike three, you're out!

The Bottom Line

That is it for today, folks! This is how Sears died. The company suffered a slow and painful death, choked by offline competitors like Walmart and online competitors like Amazon. Almost everyone is blaming the new CEO of Sears, Eddie Lampert, for the decline of the company. I support this allegation. Sears has become a major example of how mismanagement can kill businesses. Lampert, once thought to be a wizard, failed miserably in steering Sears to a better future. Even the Former Senior Executive of Sears said the following in an interview.

"The only way you see Eddie is through a screen."

 No wonder Sears bit the dust.

Thank you for reading and have a great day ahead!

-Ritin Malhotra