Sears Finally Entered Bankruptcy. The Struggle to Save It Was a Noble One.

Sometimes a bankruptcy isn't evidence of some hedge fund manager's hubris or humiliation, but merely a reminder that risk is part of capitalism.


About a decade ago, as I was on my way to meet Edward Lampert for the first time, a friend said to me about the turnaround that Lampert was attempting of Sears and Kmart: "It may fail, but if it does, it will be a noble failure."

Today's Chapter 11 bankruptcy filing for Sears Holdings has generated a lot of discussion, accurate and inaccurate, about the "failure" aspect of it.

But a true account of what has happened requires some notice, too, of the "noble" aspect of it.

For the sake of disclosure, let me state that I know and admire some of the people involved, including Lampert. I am also a Sears Holdings shareholder.

An editorial in The Wall Street Journal described the situation as "a reminder that short-term management rarely prospers" and faulted Sears for failing to "make investments to better compete in the digital era."

That is not at all how I see it. Lampert took control of Kmart when it emerged from bankruptcy in 2003. When Kmart announced its acquisition of Sears in 2004, press coverage described Sears as "broken" and "mired in a retail slump." It is now 2018. That's 14 years (for Sears) or 15 years (for Kmart) of patience and determination and hard work and rigorous analysis trying to rebuild a business that—remember—started out with bankrupt Kmart.

What has happened during those 14 or 15 years? Since 2005, Sears Holdings contributed more than $4.5 billion to fund long-established pension plans supporting Sears retirees whose careers at the company predated Lampert's arrival. That compares favorably to General Motors, which went bankrupt in 2009 after the financial crisis in part because of its obligations to retirees. Sears management also kept open a lot of stores for a long time, hoping they'd turn around along with the economy and the company's transformation. That kept a lot of Sears and Kmart employees working. That was a long-term bet that didn't work out. A short-term mindset would have immediately closed more stores.

As for digital investment, you could pay off Sears' debt if you had a dime for each news article faulting Lampert for spending too much on digital and not enough on remodeling retail stores. Sears Holdings was doing "integrated retail" such as "order online, pick it up at the store," earlier than many of its competitors. Land's End, which was owned by Sears Holdings during much of this period, successfully transformed from a paper catalog and telephone merchant into an email and web business. Sears Holdings developed a "Shop Your Way" platform that allowed it to communicate with customers directly by email and text messages, without relying on newspaper advertising, Facebook, or Google.

Sears Holdings was competing, though, against Amazon, which had no legacy pension obligation and which had the additional advantage of, unlike Sears Holdings, mostly not collecting sales tax.

Plenty of people denounce the labor conditions and market dominance of Walmart and Amazon without doing anything about it. Sears Holdings actually attempted to compete in that retail landscape.

It wasn't out of altruism. If Sears Holdings had managed to succeed better, the beneficiaries wouldn't have only been pensioners and employees, but also shareholders, including Lampert. But interests were basically aligned, contrary to portrayals of Lampert looting the company through "financial engineering."

Lampert could have quit and cut his losses years ago. Some have seen his failure to do so as hubris.

I prefer to describe it as guts.

Restoring venerable brand names to their former glory is challenging and can take more time and money than one plans or has, as I know from my own experience with the New York Sun.

Lampert has put his own money, time, and reputation on the line, for a decade and a half, out of a sense of honor and responsibility to shareholders and stakeholders. Even now he's not giving up, reportedly fending off pressure from banks for a liquidation and insisting instead on a reorganization and restructuring that will allow Sears and Kmart to, as a Sears Holdings press release put it, "save the Company and the jobs of tens of thousands of store associates."

Plenty of investments that might have looked good in 2003 or 2004 didn't turn out so well in the end. Some have even turned out worse than the Kmart debt that Lampert eventually converted into post-bankruptcy control of the company. Lampert and his partners and shareholders have come away not with nothing but with shares of other entities, such as Land's End, Sears Canada, and Seritage Growth Properties, that they have had the opportunity along the way to either sell or keep.

As outcomes go, it's obviously not the one Lampert or his shareholders would have preferred. But the story isn't over yet.

However it does eventually end, there will be a temptation to match the business outcome to a morality tale. Sometimes, though, a bankruptcy isn't evidence of some hedge fund manager's hubris or humiliation, but merely a reminder that risk is part of capitalism. There can be virtue in trying something hard even when success, at least by its financial definition, proves elusive.

Ira Stoll is editor of and author of JFK, Conservative.

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  1. I mean, just look at that 1984 (the year, not the book) style logo.

    1. Sears lost me when it got rid of its googie style store logo that I remember from the late ’60’s. That was its best logo ever.

      1. I went looking for it, and found this:

        I didn’t know that logo in the pic was actually started in 1984. For some reason the logo just reminded me of that year (the Olympics, the World’s Fair in New Orleans, etc.) It all had that same basic graphic design feel. Guess I nailed it.

      2. Equating brand with logo is a common mistake marketers make. It sounds obvious, but I swear I have seen it done again and again on a professional level and wouldn’t be surprised if the marketing team at Sears made it as well.

        Well, Sears saw an opportunity in 1900 with their catalog and became the 20th century’s biggest retailer, but no company lasts forever. One day, even the sun will die.

  2. An interesting take, one might even say a noble attempt to look on the bright side. Certainly a better-handled bankruptcy than Government Mutters.

  3. Can’t sell a better product at a lower price?
    Welcome to bankruptcy court.

  4. Ah, Sears… As a kid I remember getting the inch-thick “Wishbook” at Christmas time. I would pour over its pages, making a Christmas list.

    As a teenager, I went there and lusted after the Commodore 64 and Atari 800XL computers. (also the fancier Apples)

    When I was a senior in high school, I worked there, putting bikes together and running the register in the sporting goods department.

    But things that are gone, are gone.

    1. Thanks for the anecdote. Interesting times eh?

    2. I had similar memories, though when I was a teenager one could not yet buy computers from Sears . . . 😉

      My dad and his brothers grew up in a Sears house (was a wedding present in the early 1930s from my grandfather’s parents). Still standing sturdy and charming, though occupied by someone else’s family.

  5. In the 80s I knew Sears as two things:
    A place to buy hand tools
    A place to buy appliances

    Everything else if I recall correctly, was priced considerably higher than almost everywhere else, and so not even worth looking at.

  6. So what’re they gonna do with the old Sears Tower in Chicago?

    1. They sold the Sears Tower way back in the 1990s. It’s now officially known as the Willis Tower.

      1. Willis Tower? Doesn’t have the same ring. I’m sticking with Sears Tower.

        1. Most people do

      2. What you talkin about!

  7. What’s cool about Sears is they were the Amazon of their time. They sold pretty much everything that could be sold.

    1. Sears was perfectly positioned to be Amazon, or at least a big competitor, but they never even tried.
      A huge lack of vision at the top.

      1. Nah, they really weren’t. The general catalog had been gone a number of years before Amazon came on the scene (and catalog sales had been shrinking for a long time before that). By the internet era, they were a mall-based department store chain.

    2. You could buy a freaking house from Sears. Or at least a kit for one. And a lot of those houses are still standing.

      1. They also sold cars.

      2. A kit is correct. They would ship it to you by rail. You can find a small neighborhood of them close to Winter Garden, FL, hwy 545 just south of the Turnpike overpass.

  8. I worked in the auto center 1988 & 89. Tires, batteries, shocks, exhaust. Tires paid the least but you more than made it up in tips. Let a guy with one dismounted flat jump the line to get a fast patch=$.

    In my opinion they blew it when they decided to de-emphasize their brands and go “Brand Central”, selling “name brands”. DieHard, Roadhandler, Craftsman and Kenmore WERE name brands! Obviously they were all made by other companies, but the Sears specs combined popular features at a decent price.

    1. Curious. You got paid commission, and tires paid the least. Is that right?

      1. No commission paid to the guys turning the wrenches and mounting the tires, only the service writers. All hourly rate. Although you got a $1 bonus if you mounted and balanced a set of 4 tires in 45 minutes or less.

      2. No commission paid to the guys turning the wrenches and mounting the tires, only the service writers. All hourly rate. Although you got a $1 bonus if you mounted and balanced a set of 4 tires in 45 minutes or less.

  9. I still have a grew winter coat with fleece inside which I bought more than six years ago It is warm and comfy, adn wonderful…

    I will miss Sears. In a town where fashion was geared to young students, they carried clothes a mature woman could wear.

    Times change, and not for the better.

  10. I guess I am a little nostalgic about Sears back in when I was growing up. The catalog was always there to look through when you were bored. Going to Sears with my family was like a Brady Bunch experience except we didn’t sing “sunshine day”.

    My last trip to Sears that was open briefly around here was just horrible. You felt depressed the minute you walked in.

  11. I hate seeing a brand that help build modern America go away.

  12. It is part of the folklore of the IT industry that with a little foresight Xerox might have been Apple and Microsoft rolled into one. That company developed the GUI first but decided to do pretty much nothing with it. Sears dropped the catalog business in 1993 as a no longer useful relic of the past. A few months later in 1994, Amazon started business as an online catalog operation selling books. Sears had the experience, the names large numbers of potential customers, the warehouses, and the capital to have gone vigorously into internet sales, but not the right idea. That one probably belongs in the folklore as well.

  13. In 1980, shortly out of college, I had been selling real estate, when mortgage rates reached 22% and I decided I needed a part time job elsewhere. Sears hired me, and put me in the TV & Stereo Department, which included VCR’s (Beta was better). While I was there, they got in the Atari 400 and Atari 800 computers, and had them in the office supply department. I talked them into moving them to our department where at least we could demo them to customers. (We were on commission, office supply was not.)

    I was laid off from Sears in the recession (the only part-timer), but I spent the rest of the decade in great demand as a retail manager who could hire, train, schedule, and manage sales people who usually had either people-skills or computer skills, but not both. I changed jobs frequently (3 times in one year, twice) during the decade, never out of work for more than 2 weeks, and often recruited. Most of that was in computer and software retail, and the owners were also either retail experienced, or computer experienced, but not both, and regularly went bankrupt without warning (or with warning, like late payroll). [Ok, hit the character limit. see part 2]

  14. [Part 2]

    I well recall that early users of the Internet were reluctant to send personal payment information via the Internet, often shopping online, but afraid to send money. I was amazed (but not surprised) that Sears would just sit there and squander its most-trusted mail order reputation by not swooping in and dominating the market. People would send Sears money and trust them to deliver the goods–they had for generations–but Sears did not go with an online catalogue until much, much, later.

    Winchell’s and other donut shops missed the switch to bagels and to Starbucks coffee. 31 Flavors sat there while the market switched to frozen yogurt. It’s pretty common for innovators to move on or be pushed out (Steve Jobs), leaving the maintenance crew in charge. If they don’t innovate quick enough when a competitor arises, they fail.

    We consumers are pretty merciless. Sad.

  15. Now for the alternate take. He could have and should have liquidated the company many years ago. Instead, he lost money that belonged to the other shareholders year after year. He did get his own salary though!

    See also, YRCW, the company created from the merger of Yellow Freight and Roadway. I used to work there. It’s lost over 99 percent of its value. It is pretty much run just for the benefit of the top management and the Teamsters. Glad I at least never owned any.

  16. “Hey, Lois, how about we try Sears? They got good stuff.”

    “Peter, nobody’s been in Sears for decades.”

  17. Nice little company you had there; too bad you couldn’t keep it.

  18. … legacy pension obligation…

    How often do we hear that phrase in conjunction with massive financial failure, in both the private and government spheres. The socialist scheme of guaranteed lifetime pensions has been a disaster for the West.

    But Universal Basic Income will work out great!

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