Sears and Kmart News

Over 100 Sears Hometown stores across the country are closing for good, and this translates into major savings for shoppers. 

Consumers who have been thinking about making any big home appliance purchases may want to head to their closest Sears Hometown store to compare prices as company officials have said that there is nearly $40 million in inventory that needs to be sold – all at a significant discount. 

“This truly is an extraordinary buying opportunity for communities across America,” said Arnold L. Jacobs, executive managing director at Tiger Capital Group, one of the companies working on the final sales for Sears Hometown stores. “These 8,000 to 10,000 square-foot stores are filled with in-demand tools and home appliances. 

“It’s everything from Craftsman socket sets, Workpro power tools, and Kenmore washing machines to Honda riding lawnmowers, Eureka vacuum cleaners, and DieHard tool cabinets. As compared to the original price, the discounts are as high as 40 percent. That can go even higher in the case of floor models and scratch-and-dent models.” 

Making big purchases for less

There are currently 115 Sears Hometown stores still open across 36 states and Puerto Rico. Arkansas tops the list of states with the greatest number of such stores with a dozen. 

However, other states with Sears Hometown stores – and these liquidation sales – include: Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Maine, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Tennessee, Texas, Vermont, Washington, Wisconsin, and Wyoming. A full list of stores is available here. 

While three companies are handling the final sales at Sears Hometown stores – Tiger Capital Group, SB360 Capital Partners, and B. Riley Solutions -- consumers can expect to have all of their appliance questions answered by local store associates. In addition, shoppers can protect their purchases with warranties from outside companies. 

“These sales also come at a time of high inflation and continuing supply-chain disruptions, making them all the more relevant for American consumers,” said Siegried A. Schaffer, COO of SB360. “The home appliances, tools, and other products by Sears Hometown are everyday necessities for most households, and with today’s economic environment, every bit helps.” 

Sears, the retail brand now owned by Transformco, continues to get smaller. The company has announced it’s closing another 96 stores after securing $250 million in funding.

Transformco, headed by former Sears CEO Eddie Lampert, acquired the assets of Sears Holdings for $5.2 billion early this year. It took over 450 remaining Sears and Kmart stores.

Lampert’s offer was viewed by some as a way to keep Sears in business while saving at least 45,000 jobs. But not everyone was convinced, and the deal faced a legal challenge from the company’s unsecured creditors -- including manufacturers that had provided inventory and landlords who were owed back rent.

These creditors urged the court to require the bankrupt company to liquidate and sell its assets. Lampert prevailed after claiming he could at least keep 425 stores open and 45,000 people working. So far it hasn’t worked out that way.

Just 182 stores left

After the latest round of closings, which will take place by February, the company will be left with only 182 stores. In another bit of bad timing, the company said it will begin holding “going out of business” sales at affected stores on December 2 while its competitors will still be in the midst of their post-Black Friday sales.

In announcing the move, Transformco said the store closings and $250 million lifeline funding will give the company a chance to refocus on its competitive strengths. But it concedes it must deal with “a difficult retail environment and other challenges.”

Sears has been in a downward spiral since 2011, a year after its last profitable year. Since then Sears has mostly responded to mounting losses by closing stores. In several instances, it sold off some of its longtime brands.

Reasons for the decline

When Sears finally declared bankruptcy a year ago, CNBC identified five factors that led to the retailer’s downfall and the list did not include the retail armageddon brought on by Amazon. The business network said these other missteps proved to be fatal:

1. It diversified too much

2. It merged with Kmart

3. It cut too much

4. It sold good real estate

5. It was run like a hedge fund

At one time, Sears Roebuck and Company was the world’s largest retailer, a title it relinquished to Walmart three decades ago. In 2018, the year it declared bankruptcy, it was the 31st-largest retailer in the U.S., according to the National Retail Federation.

Roughly a year after filing for bankruptcy, Sears is still having to shutter some of its remaining stores due to disappointing performance.

Citing sources familiar with the matter, the Wall Street Journal reports that about a quarter of the 425 Sears and Kmart stores purchased by former CEO Eddie Lampert have closed already or are slated to close later this year.

Sears said in August when announcing additional store closures that even more closings were possible in the future. The company said it would “continue to evaluate our network of Sears and Kmart stores and cannot rule out additional store closures in the near term.” 

“Our goal remains to return the company to profitability and preserve as many jobs as possible in the communities we serve,” Sears said in a statement.

More store closings 

Lampert received approval from a bankruptcy judge to purchase several hundred Sears and Kmart locations in February, along with the Kenmore and DieHard brands, for about $5.2 billion. However, the Journal reports that 26 of those stores will be closed in the fall due to poor sales performance. Another 100 stores are set to close by the end of 2019. 

The entity under which Lampert purchased the stores, TransformCo, hasn’t said which stores will be closing. 

Since February's bankruptcy deal, Lampert and Sears Holdings have each filed lawsuits against each other. In April, Sears Holdings sued Lampert and his hedge fund ESL investments, claiming they “stripped Sears of billions of dollars of assets.” The following month, Lampert sued Sears Holdings, claiming the firm “imposed undue liabilities on Transform and deprived it of bargained-for assets, funds and other value."

A change in ownership has not stopped the bleeding at Sears. The retailer, acquired by a firm controlled by former CEO Eddie Lampert in February, says it is closing 100 more Sears and Kmart stores.

That’s in addition to the nearly two dozen Sears and Kmart stores already targeted for closing next month. And of course, it follows the shuttering of hundreds of Sears and Kmart stores over the last five years as the venerable retailer struggled against a rising sea of red ink.

At the time, ESL Investments, headed by Lampert, purchased Sears’ remaining assets the company announced that it would retain only about 400 Sears and Kmart stores. It isn’t clear from the announcement whether the 100 set for closing are part of that 400 or had already been designated for elimination at the time of the purchase.

Sears Holdings, the former owner of the brand, filed for bankruptcy protection 11 months ago. It pointed to steep declines in business lost to online shopping channels and rising debt. The following months were marked by a bitter struggle to control the company’s future, with Lampert’s hedge fund emerging as the high bidder.

Opposition to selling to Lampert

Even so, board members and vendors strongly opposed the sale to Lampert, suggesting his leadership as CEO had put the company in its predicament. In making his argument for ownership, Lampert said he could at least preserve some of the stores while saving approximately 68,000 jobs.

Even after the sale was completed, there were lawsuits. The Sears Holdings’ team that was given the responsibility of disposing of Sears’ assets sued Lampert in April, alleging that Lampert destroyed billions of dollars of Sears’ value and drove the company into bankruptcy.

Lampert defended his actions as CEO, saying he was forced to sell assets in a vain attempt to pull Sears out of what he called its “death spiral.” But Sears Holdings, which filed the suit, charges Lampert in effect “gave away the store” in deals that failed to realize the full value of the assets he was selling.

The following month, the new Sears sued the old Sears, claiming that what’s left of the old company -- the Sears estate -- has failed to turn over "hundreds of millions of dollars of assets" called for by the sales agreement.

It’s a storyline that consumers have become all too used to over the past few years: Sears and Kmart are closing more store locations. 

After being snatched up by former CEO Eddie Lampert earlier this year for $5.2 billion, Sears has continued to struggle financially. On Wednesday, new parent company Transform Co. said that it would be closing 21 Sears locations and 5 Kmart locations that have been unable to meet sustainable productivity levels. 

“Our goal remains to return the company to profitability and preserve as many jobs as possible in the communities we serve,” the company said in a statement.

Liquidation sales for the affected stores are slated to begin in the coming weeks, with closures scheduled to begin in late October. Below is a full list of the closing locations:

Sears not immune to retail apocalypse

Of course, underperforming stores are not just an issue for Sears alone. Brick-and-mortar retailers across the U.S. have struggled to keep up as consumers increasingly turn to online channels to order items. 

Earlier this week, Barneys New York filed for Chapter 11 bankruptcy and announced that it would be closing many of its locations in an attempt to return to profitability. Similar actions taken by Payless and Toys “R” Us also underscore the pervasive problem for American retail giants.

Eddie Lampert stated back in February that company officials would try to shake things up by shrinking the size of Sears and Kmart stores. The executive said that future stores will be about a third of the size of previous stores and focus more on tools and appliances and less on apparel. 

Sears retirees who had life insurance coverage through the company may now receive just $135 each from the now-bankrupt retailer, Bloomberg reports. 

About 29,000 former Sears employees had a life insurance plan through the company, which sold its stores and most of its assets to chairman Eddie Lampert’s hedge fund, ESL Investments, back in January. 

In March, Sears canceled its workers’ life insurance plan and gave them the option to pay for their own life insurance. The terminated plan would have provided death benefits of between $5,000 and $14,500 for workers, but the company now says it doesn’t have enough money to pay the full amount. 

Sears has laid out a new plan that would drastically reduce the amount of money its retirees will receive. Former Sears employees who were slated to receive thousands in benefits could now receive just $115 to $135, according to a court filing.

“The new plan is totally unacceptable to the retirees,” Ronald Olbrysh, chairman of the National Association of Retired Sears Employees, told Bloomberg. “It’s totally unfair, what Sears is attempting to do.”

A hearing on the proposal is set for August 12.

Sears Holdings filed for bankruptcy in October and sold off its assets in February, purchased by former CEO Eddie Lampert for $5 billion. But it seems that’s not the end of the story.

The transition has been marked by lawsuits, the latest filed by Transform Holdco LLC, a subsidiary of Lampert’s ESL Investments Inc., established to acquire and operate for former Sears assets.

At the time of the sale, Lampert said he planned to operate 400 Sears and Kmart stores but also said those stores would be smaller than most of those operated under the old company. The suit comes as that transition is getting underway and claims what’s left of the old company -- the Sears estate -- has failed to turn over "hundreds of millions of dollars of assets" called for by the sales agreement.

As is the case with most litigation, neither party is responding to media requests for comment.

Dueling lawsuits

Transform Holdco’s suit against the Sears estate follows April’s suit against Lampert by some of the stakeholders who are winding down the old Sears operation. That suit charged Lampert is profiting from the mistakes he made while in charge of Sears Holdings. The complaint charges Lampert’s actions destroyed billions of dollars of Sears’ value, driving the company into bankruptcy.

Lampert has defended his actions as CEO, saying he was forced to sell assets in a vain attempt to pull Sears out of what he called its “death spiral.” But Sears Holdings, which filed the suit, charges Lampert in effect “gave away the store” in deals that failed to realize the full value of the assets he was selling.

Lampert’s complaint

Lampert’s suit against the Sears estate accuses the bankrupt entity of breaking the sales agreement in numerous ways. It cites the estate’s decision to retain ownership of the Sears Holdings headquarters in Chicago. Lampert’s company also accuses the Sears estate of delaying agreed-upon payments to vendors.

“Transform believes that prompt resolution of these matters is important and necessary at this time to allow the bankruptcy court and creditors to consider the Defendants’ proposed Chapter 11 plan,'' the complaint maintains.

Meanwhile, the Sears estate will be back in court later today for a hearing on its bankruptcy plan.

Democratic presidential hopeful Sen. Elizabeth Warren (D-Mass.) is putting some heat on Treasury Secretary Steven Mnuchin, citing his time on the board of directors of Sears Holdings, as the retailer sold off assets in a bid to stay afloat.

Mnuchin served on the Sears board until 2016, when he resigned to assume a post in the incoming Trump administration. Prior to that, Mnuchin had a close friendship with Sears Chairman and CEO Eddie Lampert and had been Lampert’s college roommate.

Warren accuses Lampert of mismanaging the company and selling off assets when it did not serve the interests of stakeholders. In a letter, Warren, along with freshman Rep. Alexandria Ocasio-Cortez (D-N.Y), accused the corporate leadership of responding to alleged mismanagement by closing more than 3,500 stores and selling some of the company’s most valuable assets.

2018 bankruptcy

After Sears declared bankruptcy in late 2018, Lampert’s hedge fund, ESL Investments, was the successful bidder in gaining control of the retailer’s remaining assets. Lampert stressed that he planned to keep 400 Sears and Kmart stores open but Warren was not impressed.

“While ESL Investments had operational control of the Sears Holding Corporation, the company engaged in questionable financial engineering and other managerial decisions that enriched executives while decimating Sears' long-term growth and sustainability- ultimately resulting in Sears' bankruptcy and tens of thousands of lost jobs,” she wrote.

Warren claims Lampert loaded Sears with large amounts of debt, contributing to its inability to adapt to a changing retail environment. She notes that in Fiscal Year 2005, the company had a net debt-to-equity ratio of -0.04, and by Fiscal Year 2013, the ratio had ballooned to 1.48-1.

Last month Sears Holdings sued Lampert and former board members, accusing them of “stripping Sears of billions of dollars as it collapsed into bankruptcy." The lawsuit accused the members of the board of "assisting" Lampert in "transferring billions of dollars of the Company's assets to its shareholders" at the expense of the company as a whole.

Cites lawsuit

"In their recent lawsuit, Sears creditors accuse you and five other members of the Sears board of 'assisting' Lampert in 'transferring billions of dollars of the company's assets to its shareholders' at the expense of the company as a whole," the lawmakers said in their letter. "In your current role as treasury secretary, you have had the opportunity to intervene on behalf of Sears and in favor of Lampert's interests."

Warren said she is deeply concerned about what she called the “financial engineering” and “potentially illegal activity” that took place at Sears Holding Corporation during Mnuchin’s tenure on the corporate board.

Sears, which narrowly avoided bankruptcy after chairman Eddie Lampert’s $5.2 billion bid to save the chain was approved, is set to open three “Sears Home & Life” stores in May.

The small, 10-15,000-feet stores will be located in Anchorage, Alaska; Lafayette, Louisiana; and Overland Park, Kansas and will sell both large and small kitchen appliances, mattresses, and tools.

Under the court-approved deal to save Sears, the company was able to retain the Kenmore appliances and Diehard battery brands. It also continues to sell Craftsman tools through licensing partners. The new small-format stores will stock an expanded lineup of the company’s DieHard tools, in new categories such as lawn and garden equipment.

The planned small-format locations will also have kiosks where consumers can order items available online and in the stores and have them delivered either to the store or their home.

Back in February, Lampert hinted that future Sears stores would be smaller. He also said he thought Sears could eventually be a public company again.

“Our goal is to continue to shrink the size of our stores,” Lampert told the Wall Street Journal. “If I had my druthers, I’d rather be bigger than smaller. We still have enough of a critical mass.”

Sears filed for bankruptcy protection in October 2018. Almost two months ago, a bankruptcy judge in New York accepted Lampert’s bid of $5.2 billion to save the struggling retailer’s 425 remaining stores.

Sears chairman and former CEO Eddie Lampert, whose $5.2 billion bid to buy Sears Holdings through his hedge fund ESL investments was approved earlier this month, told the Wall Street Journal that future Sears and Kmart stores will be smaller than they were in the past.

“Our goal is to continue to shrink the size of our stores,” Lampert told the Journal. “If I had my druthers, I’d rather be bigger than smaller. We still have enough of a critical mass.”

In addition to being about a third of the size that they were before the company went bankrupt, Lampert said future stores will have less apparel and more tools and appliances.

Possibility of becoming a public company

Lampert -- who now owns 425 stores in total (223 Sears and 202 Kmart stores) -- also told the Journal that Sears could eventually go public.

“If I am a betting person, which I am, I would say at some point we would be public again,” Lampert said in the interview.

Sears isn’t the first struggling brick-and-mortar retailer to announce that it’s changing its game plan in an effort to stay afloat. Last week, competitor J.C. Penney announced its decision to stop selling appliances as part of a larger home department reorganization.

The retailer said that removing major appliances would help it "better meet customer expectations, improve financial performance, and drive profitable growth."

Some have expressed skepticism over Sears’ post-bankruptcy revival plan.

“They have a shot, but it’s a long shot,” Craig Johnson, president of consulting firm Customer Growth Partners, told the Journal.

A bankruptcy judge in New York has brought the Sears saga to an end, ruling that chairman and former CEO Eddie Lampert’s bid to keep the retailer alive -- accepted by the company on January 17 -- is approved.

Lampert’s offer of $5.2 billion for 425 stores was seen as a way to keep Sears in business while saving at least 45,000 jobs. But the deal quickly faced a legal challenge from the company’s unsecured creditors -- including manufacturers that had provided inventory and landlords who were owed back rent.

These creditors told Judge Robert Drain that they would benefit more if the bankrupt company was forced to liquidate and its assets sold at auction. The hearing went on for several days and, at one point, entered the political realm when Sen. Elizabeth Warren (D-Mass.) voiced objections to Lampert taking control of the company.

While Lampert promoted the job-preserving aspects of his buyout plan, Warren voiced skepticism that his rescue plan would be that beneficial for employees, accusing him of “slashing jobs” during his tenure as Sears CEO.

"If your offer is accepted and approved, Sears will remain open and tens of thousands of American workers will keep their jobs in the short term," Warren wrote in a letter to Lampert. "But I am concerned that under your leadership, Sears may continue to struggle and employees will continue to face uncertainty and anxiety over their future employment and ongoing risks to their benefits and economic security."

Alleged fraudulent activities

Warren also called attention to the suit filed by unsecured creditors to block the sale to Lampert, noting that their 570-page motion alleged fraudulent activities by Lampert and his hedge fund during his tenure as chairman and CEO of Sears.

The creditors got their day in court earlier this week, making one final appeal to the judge to not grant control of the retailer to Lampert and ESL Investments, his hedge fund. They argued that Lampert’s management of the company is one reason it is bankrupt.

In a filing last week, Lampert accused Sears’ unsecured creditors of engaging in efforts intended to “poison the well” against ESL with "page after page of its pleadings with smears and false narratives that are completely irrelevant" to his potential Sears’ takeover.

In the end, Judge Drain sided with Lampert, whose firm will take control of Sears’ remaining stores and assets.