(Bloomberg Opinion)—It has felt practically inevitable for years that I’d have to write the following sentence: Sears Holdings Corp., a once-towering force in American malls that was essential in creating the blueprint for 20th century retail, is preparing to file for bankruptcy.
A filing could come as early as this weekend, according to Bloomberg News, as the company bumps up against a deadline for a large debt payment.
In some ways, a bankruptcy would appear to be a turning point in the Sears saga — a long overdue acknowledgment of reality by Eddie Lampert, the hedge fund manager who is the company’s largest shareholder and CEO. Lampert has been throwing lifelines to the troubled company for years by providing loans, orchestrating real estate spinoffs and selling assets such as its Craftsman tools brand. Those moves always felt like little more than kicking the can down the road.
And yet, in other ways, Lampert appears as delusional as ever about the future of Sears. The Wall Street Journal reports that Lampert “hopes to shrink Sears back to profitability.”
Sorry, but it is hard to imagine a realistic path by which he can achieve that. The Sears empire has already shrunk substantially, with hundreds of underperforming stores cut loose in recent years.
In theory, a bankruptcy could result in Sears pruning its store fleet even further, leaving the retailer with a leaner, more productive portfolio that would be easier to manage and include only its best-performing stores. Perhaps Sears could carry on for several more years if it then invested in making those remaining stores into more attractive shopping destinations.
But here’s the overarching problem: Lampert has long proved reticent to spruce up aging stores, apparently thinking it’s not a first-order priority when his company has so many other problems. Why should we believe he’ll suddenly find it worthwhile to make such investments now? And why should we believe shoppers will return to those stores without that kind of improvement?
And of course, a restructuring would only truly mark the beginning of a healing process if Sears’s underlying business had untapped potential. But Sears has shown time and again it’s not up to the challenge of retailing in today’s cutthroat environment. The company likes to trumpet its efforts in e-commerce and its Shop Your Way rewards program as vehicles for one day returning to relevance. But the retailer has largely been mired in a pattern of dismal comparable sales growth for years. If those offerings haven’t produced stronger sales and earnings results yet, there’s no reason to have confidence they will do so going forward. And Sears doesn’t appear to have many other big ideas.
Its Kmart chain also provides little reason for hope. When retail analysts and experts talk about the intense battle for the wallets of value-conscious shoppers, Kmart is not even part of the conversation. That war is being waged by Walmart Inc., Target Corp. and the dollar-store giants, and it is difficult to imagine a scenario where Kmart suddenly horns in on that action.
It is possible Lampert once again pulls a financing rabbit out of his hat and keeps Sears out of bankruptcy a bit longer. But that would just be one last kick of the can down a dead-end road.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
To contact the author of this story: Sarah Halzack at [email protected]
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