If you live in America you must have heard the saying ‘Solid as Sears.’
And in case you haven’t, it’s probably better, as recent events have seemed to render it invalid anyway.
Founded in 1893 as a small watch company, Sears eventually grew to become a market giant and has been a dominant retailer in America for over a century now. However, the company has been facing some trouble over the last few years. With economists and analysts having speculated its downfall long ago, the recent announcement of Sears filing for Chapter 11 bankruptcy earlier this October did not come as a great shock to many.
The company had been bleeding cash for some years and at the time of claiming bankruptcy, had $11.3 billion in liabilities, while its assets amounted to a value of only $6.9 billion.
So what brought this mighty giant to its knees?
Following is a brief history of Sears and what drove the company to its current state.
Starting from being a minor watch company, Sears grew by expanding its product base. Introducing jewelry and then general store items, Sears became the choice for most farmers who were fed up with overpriced and understocked general stores.
By 1931, Sears was earning revenues of about $180 million annually, as it opened retail stores and even introduced its own brands like Kenmore and DieHard.
The beginning of the downfall
By 1969, being the world’s largest retailer, Sears began constructing the Sears’ Tower which on completion became the world’s tallest skyscraper. It was around that time that the company’s dominance began to fade. However, despite its revenues reaching up to a mind-blowing $59 billion in the year 1992, Sears decided it needed to simplify the organization’s structure.
Therefore, shares were distributed to investors, its famous catalog was discontinued and the pre-web online portal, Prodigy, which was created in partnership with IBM, was sold as well.
By the beginning of the 21st Century, the company had returned to its retailing roots. However, by the year 2005, to save the discount retailer at the edge of bankruptcy, then CEO of Sears, Eddie Lampert, decided to merge the company with Kmart.
Economists have criticized this move as a highly misguided measure. Lampert did not make any necessary investments in the merger while competitors like Walmart and Amazon adapted to the changing market needs and technological advancements.
The nail in the coffin?
To the utter shock of its stakeholders, Sears didn’t sail the boat of e-commerce. The company did nothing but watched silently as other firms stole its market share and dug deep on its appliance business as well as fashion and apparels sections.
Although there have been many events which contributed to its downfall, CEO Eddie Lampert is believed to share the blame largely owing to his poor decision-making. Even though the sales had been decreasing considerably for more than ten years and with annual losses piling up, Lampert did not take adequate measures to bring the company back on track.
Now that it has claimed bankruptcy, Sears has to close 142 stores by the end of this year, apart from the previously announced closure of 46 others.
Despite all of this, the company hopes to reemerge from bankruptcy, salvaging whatever part of the business that it can. But with Lampert still the major shareholder in the company, even though he has stepped down from the post of CEO, will the past mistakes be repeated?
Only time will tell whether Sears will soar or be seared again.