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Awash in red ink totaling $5.6 billion, facing a debt payment of $134 million, and losing market share and cultural relevance, Sears Holdings filed for Chapter 11 bankruptcy protection early this morning.

According to the New York Times, “As part of the reorganization plan, Sears has negotiated a $300 million loan from Wall Street lenders to help keep its shelves stocked and employees paid. The company said it was still negotiating with Mr. Lampert’s hedge fund, ESL Investments, for an additional $300 million loan. Mr. Lampert will step down as Sears chief executive, but will remain the company’s chairman. Three other Sears executives will serve in a newly created role, the office of the C.E.O., overseeing daily operations.”

The Wall Street Journal reports that the deal “will allow the 125-year-old company to keep hundreds of its stores open for now … Sears said it would close 142 money-losing stores near the end of the year, with liquidation sales expected to begin shortly. The closings are in addition to 46 stores that are expected to close by next month. Currently, the company operates roughly 700 Sears and Kmart stores. It employs about 70,000 people.”

The Times notes that Lampert has been running the company since 2005, and has “stripped out many of the company’s valuable properties and brands - and then laid claim to much of what is left over - while failing to develop a winning retail strategy … More recently, Sears became known for another distinction — Mr. Lampert’s audacious feats of financial engineering. He has spun off numerous assets from the retailer into separate companies that his hedge fund invests in.

“While many of these spinoffs have flourished, Sears slid toward insolvency. Over the last five years, the company lost about $5.8 billion, and over the past decade, it shut more than a thousand stores.

“Many of the 700 stores that remain have frequent clearance sales, empty shelves and handwritten signs.”

The Times also writes that “through the 1960s and 1970s, Sears shared its success with employees at all levels of its corporate hierarchy. Cashiers, janitors and executives alike took part in profit-sharing and received options in the company’s soaring stock.

“As many as 100,000 retired Sears employees still receive pensions, which are expected to emerge largely unscathed in the bankruptcy. As the company was bleeding cash and selling off assets in recent years, federal regulators required Mr. Lampert to inject cash into the pension plan. Other benefits for retirees like life insurance, however, could be in danger.”
KC's View:
Some will suggest that this is a case of homicide by Amazon, but I would argue that it is largely suicide by mismanagement and lack of innovation.

This almost certainly is a stopgap measure, and Sears will end up in the same business graveyard occupied by Montgomery Ward, Blockbuster, EJ Korvette, and WT Grant. Gone. Dead. Buried.

We’ve been relentlessly critical of Sears and Lampert here almost from the beginning … early on, Lampert decided to take charge of merchandising, which I found rather startling since he seemed to know a lot more about hedge funds than hedge clippers. It ended up that this was just the beginning of a series of missteps.

Here’s what we all know for sure. Lampert will come out of this thing just fine. He won’t have to sell any houses or cards or boats or planes. The family won’t be going on austerity any time soon, and nobody will miss any meals. His insurance bills will be paid, nobody will have to rethink any doctors’ visits.

I feel bad for the Sears employees who will end up without jobs, but if I worked for Sears I would’ve found a new job a long, long time ago, and maybe developed some new jobs skills.

And one other thing. They may be keeping some stores open, but who exactly will shop at them knowing that the company is teetering on collapse?