Sunday, February 03, 2019


Sears, once an American retail giant, has gone bust. Sears is now a shadow of its former self, having closed almost 3,000 stores and cut more than 250,000 jobs since 2007.

Its top 340 executives were collectively granted a potential $25m in bonuses in December, just months after the firm declared bankruptcy.

Veteran journalist Michelle Celarier has estimated that longtime Sears chairman and former chief executive Eddie Lampert has made nearly $1.4bn (£1.1bn) off his investment in the company, thanks to performance fees, dividends and other payments.
Sears spent millions purchasing its own stock - inflating prices in a win for shareholders such as Lampert, who became chair of the firm in 2005, after arranging its merger with Kmart. Sears later borrowed more than $2bn from his hedge fund, ESL Investments. 
It also sold off parts of the business, including hundreds of properties and the mail-order catalogue Lands End, to companies affiliated with Lampert. 
ESL is now offering to buy Sears out of bankruptcy for $5.2bn. The plan could keep 425 stores open and retain up to 45,000 jobs. "ESL's current bid to 'save' the company is nothing but the final fulfilment of a years-long scheme to deprive Sears and its creditors of assets and its employees of jobs while lining Lampert's and ESL's own pockets," attorneys for a group of unsecured creditors wrote.  They accused Lampert of driving the firm to failure. Lampert will be acquiring the business on the cheap.
Elizabeth Warren slammed Lampert citing the "inherent conflicts of interest'' in the hedge fund manager's takeover of bankrupt Sears Holdings Corp. 
Warren calls Lampert a “practitioner of predatory capitalism” and questions his motive for buying the very retail chain that fell into bankruptcy under his leadership. Lampert’s hedge fund ESL Investment recently won an auction to acquire the bankrupt retailer for $5.2 billion.
“Simply put, it appears that you have enriched yourself while driving the company into bankruptcy,” she wrote.
Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington, says those deals limited Sears' ability to invest in the future - just as the need to compete with online shopping made those investments critical. That is a pattern seen repeatedly in the recent retail failings, she said. "They want to blame everything that happens on Amazon," she says. "The fact that they have starved these organisations of resources...that's the real story."
The U.S. retail meltdown is far from over.While the collapse of storied merchants like Sears and Toys R Us has left stores shuttered across America. Consumer confidence is slumping. The head of the biggest mall owner in the U.S. cautioned that more retailer bankruptcies are coming. 
"We're heading more and more into a distressed market," said Bobrow, managing director at Wells Fargo Capital Finance. Whitmore, managing director of retail finance, says retailers are laboring under debt levels that "just eclipses anything we saw in the recession."

No comments: