The Sears Bankruptcy Is A Cautionary Tale For Hedge Fund Managers

Ted

FYI: Sears Holdings Corp . filed for bankruptcy early on Monday morning, the culmination of a years-long decline of the American retail institution, providing another example as to why hedge fund managers should steer clear of retail.

Sears (ticker: SHLD) sought Chapter 11 protection and announced a deal with its lenders that will let it keep many stores open and continue paying vendors and employees. Its $1.8 billion debtor-in-possession asset-based credit facility gave it some $300 million more than it had before filing.

Bankruptcy enabled it to “reject leases” on about 220 store locations, almost all of which are “dark stores” not open to shopper traffic where Sears has already shut operations. Sears will start “going out of business sales” at another 142 unprofitable stores, which will close by year-end. It had already announced intention to close 46 stores by November. The 125-year-old company operates about 700 Sears and Kmart stores, and employs about 70,000 people.
Regards,
Ted
https://www.barrons.com/articles/sears-bankruptcya-cautionary-talefor-hedge-fund-managers-1539619499?mod=hp_DAY_2

Charles

Ouch.

Seduced by EL.

c

davidrmoran

remember this from a couple years ago

https://www.pbs.org/newshour/economy/column-this-is-what-happens-when-you-take-ayn-rand-seriously

BenWP

Happened to have a tennis buddy who managed the local KMart and was a career employee. When EL took over, all long-term managers were forced to retire. Similar treatment of the manager of the pharmacy in the store; he was younger but got shafted equally badly. I can think of nothing good that has come from Lampert’s involvement.

hank

What was the point of:

1) Leaving KMart’s stores outdated and in disrepair for years?

2) Cheapening their merchandise to the point where no one would buy it?

3) Operating mega-sized stores with a single cashier (adding new meaning to the term “slow”)?

4) Allowing often vacant (of customers) but fully stocked stores to remain open near round the clock?

5) Allowing KMarts to cannabalize sales of nearby Sears outlets by selling Sears branded merchadise (Craftsman and Kenmore) at lower prices and during more convenient hours?

Geez - If you set out intentionally to ruin a business, you couldn’t do a better job.

The interplay between EL’s hedge fund and Sears Holings is curious. I don’t pretend to understand it. But it appears suspect. Apparently, near the end, his hedge fund was trying unsuccessfully to buy off the valued Kenmore brand from the parent company.

https://www.businessinsider.com/how-eddie-lampert-set-sears-up-to-fail-2017-5

Sven

I understand that Sears is trying to sell off the Craftsman brand hand and power tools to Home Depots and other home improvement centers. I still have few Craftsman power tools which are well made at that time. These days there are many quality options from Makita, Bosch, Rigid (Home Depot brand), Milwaukee and etc.