Sears

Well, Sears has filed for bankruptcy. Surprising right? They'll be closing 142 more stores, that's on top of a ton of stores they've already closed recently and some that were already set to close. But they're not going away completely. Yet. I've had many, many people bring t Before the bankruptcy I was getting a bunch of requests. Well, the time has come. And I hope you won't be too disappointed to learn that I don't care. I genuinely do not care about Sears. Now let me qualify that. Of course, I feel for all the people losing their jobs and the stakeholders losing money and all the people and companies affected that did business with Sears. T And I care in a business sense. It's a really interesting case study that's truly one of a kind. So that's where I draw my passion to make t But as a cons I mean, zero personal attachment. I say that because I don't shop there, but I didn't shop at Toys R Us either and I was sad to see them go. Here's a metaphor I'm sure you've never heard before. Sears? Is Aldous Snow, w On the off chance you've missed it, let me fill you in. Aldous was once one of the greatest musicians on earth. He spoke to a generation. Every song he made was a n You get the picture. But somewhere along the way, he lost it. He became more concerned with the money and the fame. Then the actual song started putting out garbage alb That's exactly what happened to Sears. Not the drug part, but the connection part. The reason I don't care about Sears is because I've only been around for the garbage alb They never spoke to my generation. It's the past generations that care about them. It almost appears that the older you are, the more Sears meant to you. And Sears was big. They've been commonly called the Amazon of their time. It'd be weird seeing headlines saying Amazon filed for bankruptcy. So before we focus on all these terrible alb Sears was started by a guy named Sears, Richard Sears. He initially started a business selling watches, despite knowing very little about watches. He was more of a salesman. So very early on he was forced to And that guy was named Alva Robuck. T A year later they started t Wit In 1893 they changed their name to Sears, Robuck and Company. But actually neither Sears nor Robuck stayed with the company for as long as you might t Only two years later Robuck sold From there, Richard Sears resigned as president after two years, retired altogether two years after that, and died one year after that at age 50. But obviously the company lived on and continued to be successful. The concept of the catalogs was I'm sure the biggest contributor to that success, but some other factors, their money back guarantee, offering credit to customers, a strong supply chain and just selling a wide variety, all the whole idea be But then the car, it started becoming popular and urban areas were becoming more accessible. Sears viewed t In 1925 they opened their first store and boy was it a Their retail locations started expanding rapidly and wit From they turned into the n In the first half of the 1970s they built the Sears Tower. It was in C But that's when the decline that Sears has experienced that's led to its current bankruptcy stems back over 40 years. By t Large department stores The answer for Sears was to buy a bunch of other companies and then get rid of a bunch of companies and then go strong into the credit card business. In the 1980s they started Discover Card and then spun it off a few years later. In the 1990s they put a huge emphasis on their own Sears credit card and then sold it in 2003. Also in the 80s they bought Coldwell Banker Company, the country's largest real estate brokerage, but then sold it in the 90s. It was a lot of they also got rid of the Sears Tower in 2003 but during all of these moves Walmart and everyone else was gaining ground on them. I A question whether Sears or Walmart was the n I was born four months after t It was only two years later when Walmart took that n In the same year that Sears stopped offering their catalog by 2003 they were n From the mid 70s to the mid 2000s t It was a crazy time with a lot of t Walmart and the other retailers started finding their own ways to compete with Sears and in response instead of trying to strengthen their stores and stay competitive they instead chose to diversify and make some strange acquisitions then sell those acquisitions then buy other t Some of these moves really worked but it really did not seem to be the best strategy for the company. That brings me to the modern era of Sears w I don't really know how else to describe it and t Let me tell you about Eddie. He's a Wall Street investor type famous for Basically he and a few other billionaires pulled their money together and Eddie invests it. In the early 2000s he had a lot of success with AutoZone and in 2003 he invested big into Kmart who had just filed for bankruptcy and actually made a couple of moves that looked promising. In late 2004 he decided to buy Sears and merge it with Kmart w The idea be Many people thought that t Let me show you how it went. All of these n T It's amazingly lower each year. You would t Here's their income for that same range. It at least started out positive but then they've been losing money for the past seven years. Here's a graph that shows their n Their peak was in 2011 with 4,000 and by the end of 2017 they were down to 1,000. That n T Comparable Store Sales. It shows how much each store is selling compared to the previous year. 13 straight years of negative comparable store sales. That's crazy. In 2017, despite closing hundreds of stores, they're selling 13. 5% less in each store on average. All of these n Look at t In 2017, they had more liabilities than they had assets. That means even if they sold everyt Think of it You just bought a $7 billion house and you owe the bank $11 billion. That means negative equity w Every part of their financial statements is crazy. They're paying hundreds of millions of dollars interest each year. There's massive obligations involving pension benefits and their problems go way beyond that. I can talk for the next 10 minutes about how bad these statements look. Remember even after decades of struggles, right before Eddie took over, they were the n Today, they're n And that's when you combine Kmart and Sears together. I'll go out on a limb and say that Eddie Lampert was not able to turn t But the question is, was it I can see why you might defend He took on two different struggling companies. The odds were against During t And even despite all that was some defense for Now let me tell you the other side. T Listen to t Eddie Lampert is the chairman of Sears, and from 2013, up until the recent bankruptcy, he was the CEO. He's also the chairman and CEO of And has provided many loans to Sears, w A good portion of that interest expense that Sears is paying every year goes to ESL. A lot of that debt that Sears has was money lent to them by ESL. So when they're filing for bankruptcy, it's ESL that's looking to recover the money that they're owed. Do you see how they're on both ends of the bankruptcy. Now let me take t Saritage Growth Properties. T We'really getting into it here, but effectively what happened is Sears sold 235 stores to them for $2. 7 billion. Then instantly started renting those stores from them. It was good for Sears because it brought in $2. 7 billion of much needed money, but then the issue became whether or not that was a fair price for all that property. Since Eddie Lampert is basically selling it to There was even a big lawsuit involving all t Now if you didn't follow all that real estate stuff, just forget about it. Here's the point. Eddie Lampert has been widely accused of acting in the interest of He's been selling things Aside from all that real estate, Sears Canada, Lansend, and Orchard Supply were all spun off into their own companies. In addition to that, they sold the brand Craftsman to Stanley Black and Decker. They've allowed Kenmore Appliances to be sold elsewhere. He's actually offered to buy Kenmore The takeaway is Sears needs money badly, and instead of trying to find ways to increase sales in the stores, he'selling their assets. Assets that could be used to generate money. And it also seems that To be honest, I don't understand what he's trying to do. Why would he intentionally be trying to harm the company when he owns it? At t He might just be really bad at running a retail business. I mean really bad. There's other examples I can cite of seemingly poor management, but it really just doesn't seem to be working. From what I've read, he doesn't seem to be willing to listen to the advice of others. Maybe he has too much pride to admit that Or maybe he'smarter than any of us, and somehow t I'm not leaning on that option, but it's possible. It all comes back to eldest snow. They've lost touch with their fans, or in t From my point of view, they just don't seem to care. I don't know why, but Eddie Lampert doesn't seem to care what happens to Sears or Kmart for that matter. When you go to either one, the store isn't updated, the employees aren't known to be particularly pleasant. No offense. There's poor selections, But as a customer, if I get the impression that Sears doesn't care about me, why should I care about them? Let me know in the comments. Do you agree with that statement? Was Eddie Lampert responsible for t It's been a long 40-plus year decline with an embarrassing final decade. You'd have to be 50 or 60 years old to be able to truly respect what Sears once was. So if there's anyone watc And please, share any other thoughts you have about Sears. I'd