Can You Think Of An Example Of A Retailer That Was Successfully Turned Around?

As Sears' prospects began to fade, investors were increasingly eyeing its real estate, and Sears decided to take advantage of the tax-advantaged spin off of around 200 properties into a REIT that began trading as Seritage Growth Properties (SRG).

Summary

  • "I don't think any retailer should aspire to have its real estate be worth more than its operating business." - Eddie Lampert.
  • The clock is ticking and I give Sears credit for extending the prospects for bankruptcy.
  • However, the company is still burning through cash and the odds of survival (without entering bankruptcy) is at an all-time low.

I recently ran across an interesting website called “Tears for Sears” in which the company publishes consumer news on the subject of the once-leading department store chain, Sears Holdings (SHLD). Scrolling down the website you can see a series of headlines including:

The list of bad news is almost endless for Sears and the so-called “death spiral” has been forecasted for years and years. Back in 2005, Warren Buffett told University of Kansas students:

"Eddie (Lampert) is a very smart guy, but putting Kmart and Sears together is a tough hand. Turning around a retailer that has been slipping for a long time would be very difficult. Can you think of an example of a retailer that was successfully turned around?"

When Kmart's acquisition of Sears was announced in 2004, Eddie Lampert commented:

"I don't think any retailer should aspire to have its real estate be worth more than its operating business."

As Sears' prospects began to fade, investors were increasingly eyeing its real estate, and Sears decided to take advantage of the tax-advantaged spin off of around 200 properties into a REIT that began trading as Seritage Growth Properties (SRG). In an ironic twist of fate, Warren Buffett became a shareholder in Seritage on December 9, 2015.

Sears has cut the hours, pay and headcount of retail staff to save cash, causing stores and customer experience to deteriorate. One employee wrote to Business Insider in August 2016:

"We have a 17-year-old running the office and cash office. He has no experience in either, but he is a warm body to fill the job. The end is coming soon, get out while you can."

Closer to Bankruptcy for Sears?

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