Sears, one of America’s most renowned retailers, has filed for Chapter 11 bankruptcy. It seems the staggering losses suffered in recent years and the crashing debt have finally taken their toll. Sears at one point dominated the US retail industry. However, the company has failed to adapt to changing shopping behaviors. Sears had also announced a plan to reduce its presence in an effort to save the business. It’s still not clear whether this has been achieved. Nonetheless, experts are pessimistic about its chances and it’s very likely the retailer may have entered its last chapter.
Sears started out as a mail order catalog in the 1880s. However, the company started losing ground on its competitors and suffered massive losses over the years. But the issue hasn’t been affecting Sears only. Other retailers too have also gone under in what appears to be a very fierce competitive climate. But maybe there’s some hope. After all, there have been a few retailers that have emerged from reorganization in bankruptcy court. Payless ShoeSource is a good example of this but even then, there are still so many challenges ahead for Sears.
The Chapter 11 filing will have far-reaching effects given Sears’ large size. The company employs tens of thousands of workers whose fate remains unknown as a result of the bankruptcy. The company will also have to close major locations around the country leading to major income losses for landlords and commercial real estate owners. In addition to this, the filing comes just a few weeks before the holiday season where sales tend to really spike.
Despite increasing efforts to restructure debt and prop up the retailer through creative funding, nothing has really worked. Sears’s stock has plunged from $6 in recent months to less than $1, the minimum stock price required for companies to trade in the NASDAQ index. This downfall is quite massive especially when you consider that in 2007, Sears’s stocks were trading at little over $147. In addition to this, Sears, which once had over 350,000 workers, had downsized massively. At the moment the company employs at least 90,000.
Sears last made a profit in 2010. Ever since, the retailer has accumulated losses of nearly $6.26 billion. In its last fiscal year, overall sales stood at $16.7 billion, a big dip compared to the $50 billion recorded in 2008. Sears’ store presence has also taken a hit. In 2008, for example, the retailer had 4,000 locations around the country, and this number has been reduced to just 900 now.
At one point in 2017, Sears admitted that it had become increasingly doubtful that the store would be able to keep its doors open although efforts to turnaround the trajectory were in place. However, the store continued to record losses quarter after quarter, hampering any hope of a turnaround. To make matters worse, suppliers also refused to supply products without stringent payment options. This has left the shelves empty for a while contributing to poor sales and net losses. Many analysts seem to agree that Sears’s failure to adapt to the changing retail landscape is the main cause of its downfall, and they are absolutely right!