Why Sears is near bankruptcy and closing stores

Sears CEO Eddie Lampert.
Reuters

• Sears, once
  America’s most iconic retailer, is reportedly on the verge of
  
  filing for bankruptcy. 
• Sears CEO Eddie Lampert has blamed the company’s
  decline on the
  media, shifts
  in consumer spending, and the rise of e-commerce, among
  other reasons.
• But analysts and critics say the company’s demise is
  the result of years of under-investments in stores.
• Some stores have shown
  signs of decay, such as crumbling walls, cracked floors,
  and collapsing ceilings. Sears employees have hung bed sheets
  and shower curtains to hide empty store space.

Sears
has survived two world wars and the Great Depression. But after a
little more than a decade under the control of a former Goldman
Sachs executive turned hedge fund manager, the 125-year-old
retailer is imploding.

Sales have fallen by half since 2014, and the company is burning
through cash, closing hundreds of stores, and slashing jobs in an
attempt to stanch the bleeding. Now, just days before a $134
million debt repayment deadline, the company is reportedly

preparing for a bankruptcy filing.

Read more: Inside Sears’ death spiral: How
an iconic American brand has been driven to the edge of
bankruptcy

The man in charge of Sears, Edward S. Lampert, has blamed the
company’s decline on the
media, shifts
in consumer spending, and the rise of e-commerce, among other
reasons.

For years, he has kept the ailing retailer afloat through
billions of dollars in loans from his hedge fund, ESL
Investments, the selling
off of valuable real estate, and the slow dismantling
of Sears’ exclusivity over some big American brands.

Business
Insider

He has said these measures would buy Sears more time
to execute a transformation that will lead
the company back to profitability.

But analysts are skeptical that the company can make a comeback
following years of under-investments in stores.

“The problem
in 
Sears’
 case is that it is
a poor retailer. Put bluntly, it has failed on every facet of
retailing from assortment to service to merchandise to basic
shop-keeping standards,” says Neil Saunders, the managing
director of GlobalData Retail. “That failure has manifested
itself in lost customers, lost market share, and a brand that has
become tarnished and increasingly irrelevant.”

Business
Insider

Lampert’s critics —
including some former Sears executives — have also
blasted him for managing a company in crisis from afar, only
visiting Sears’ headquarters about once a year for the annual
shareholder meeting.

Instead, Lampert prefers to stay at his
$38 million estate on Indian Creek Island, off the coast of
Miami, and communicate with employees primarily through
teleconference meetings. 

As sales have tumbled from $53 billion in 2006 to less than
$17 billion last year, Sears has closed hundreds of stores,
reducing its total
locations to 866 stores as of September 13, down from
1,980 stores in 2013.

Business
Insider

Some stores have suffered severe
decay, such as crumbling walls, cracked floors, collapsing
ceilings, and a lack of working toilets for weeks on end,
according to store visits and interviews with Sears employees
over the last two years. 

In addition to maintenance problems, several stores feature
barren shelves and empty floors, which is likely the result of
suppliers exacerbating
Sears’ problems by threatening to cancel
contracts and demanding new payment terms for orders.

Some stores have started hanging bed sheets and shower curtains
from the ceiling to cover empty areas. The company has also
introduced handwritten
pricing signs in an apparent effort to slash costs. 

Lampert responded to the supplier troubles last year by
blaming the news media in a rare
interview and publicly
threatening to sue two of its top tool vendors.

Business
Insider

He has also defended his investment strategy in stores.

“I was criticized for not investing enough in the stores,”
Lampert said
in 2013. “My point of view is we couldn’t invest in
everything.”

Some loyal shoppers are lamenting the loss of what was once
America’s most iconic retailer. 

“I’ll never understand why Sears was allowed to flounder
for so many years,” Sears shopper Robert Moon told Business
Insider this week. 

“Sears
 was the number one retailer in the
world” and “the industry pioneer in catalog purchases,” he said.
“They could have been pioneers in online purchasing. It could be
Sears instead of Amazon.”

Read more about Sears’ downfall: