Penney has done even worse, but Lowe's, Best Buy, and Home Depot have all seen their share prices at least double. Amazon shares, on the other hand, are up nearly fold. Even for a brick-and-mortar retailer in the digital era, Sears is struggling. In the mids, Richard Sears worked as a station agent for the Minneapolis and St. Louis Railway in North Redwood, Minnesota. He would sell lumber and coal on the side, giving him experience that came in handy when, in , a local jeweler rejected a shipment of gold-filled watches from Chicago.
Sears bought them himself, sold them at a profit, and ordered more. He founded the R. Roebuck, a watchmaker from Indiana. Both were in their twenties. They launched a catalog of watches and jewelry the following year and incorporated Sears, Roebuck, and Co.
Two years later, a Chicago clothing manufacturer, Julius Rosenwald, bought into the company. By that time, the mail-order operation branched out from watches. Farmers, fed up with understocked and overpriced general stores, flocked to Sears. The company sold stock in in the first initial public offering IPO for an American retail firm—the first to be handled by Goldman Sachs. It opened a acre logistics center in Chicago that very same year.
Henry Ford eventually made a pilgrimage to this "'seventh wonder' of the business world" to learn about the company's storied efficiency. Sears Holdings was delisted from the Nasdaq in Oct. Ford would throw a wrench in Sears' business model, as cars made chain stores more appealing and mail-order catalogs less crucial for rural customers. Sears adapted, opening retail stores in the s that outsold the catalog by The company began to introduce its own brands in the s, including Craftsman, DieHard, and Kenmore.
It began selling insurance through its Allstate subsidiary in In , Sears, the largest retailer in the world, began construction on the world's tallest skyscraper. The Sears' Tower's completion four years later may not mark the company's peak, but its retail dominance began to fade around that time. In the s, it adopted a "socks and stocks" strategy, expanding into financial services beyond its existing insurance business.
It launched Discover Card through Dean Witter in Built on a private network, it was distinct from the Internet but presaged it in many ways, offering email, games, news, weather, sports, and shopping.
It took parts of Dean Witter and Allstate public, then distributed the remaining shares to investors. Sears also sold Coldwell Banker, along with other financial services subsidiaries. Sears discontinued its famous catalog in According to the company archives, it "returned to its retailing roots" by Investors began to worry that the earlys recession made credit card issuance too risky, and Sears sold the business to Citigroup C in At the turn of the century, Sears turned to the web in earnest.
A July press release boasted that sears. At that time, Sears' problem was not so much Amazon as it was Walmart, which became the nation's largest retailer in the s.
The combined companies—to be headquartered in Chicago and called Sears Holdings—would operate around 3, locations. Analysts expressed excitement at combining the fading giants' mainstays, cross-selling brands such as Sears' Craftsman and Kmart's Martha Stewart Everyday. Lampert left Goldman to start a hedge fund in at the age of 25 and bought up Kmart's debt when the retailer declared bankruptcy in As chairman of the combined company—he took on the CEO role as well in —Lampert initially attracted breathless praise from the media.
A Bloomberg Businessweek cover story called him "the next Warren Buffett. A little over 13 years later, such comparisons seem ridiculous. Sears Holdings' sales rose in , its first full year as a combined company, but then fell in each of the following nine years. The recovery was tepid and short-lived.
Shares peaked again that April at less than two-thirds their pre-crisis high. They have not recovered since. Kmart was Lampert's first majority stake, and he proved to be a better speculator than a manager. A Bloomberg article excoriates his Ayn Rand-inspired approach: In , he split the company into 30 divisions—which swelled to 40 a year later—each of which reported profits separately and had to compete with the others for resources.
Lampert was both strict with money and distant, seldom leaving his home in South Florida. Divisions found themselves acting like separate companies, even drawing up contracts with each other. Compensation costs rose as each division hired its own senior management. These executives, in turn, had to form their own boards, and their pay was determined according to an in-house profit metric that led to cannibalization as some divisions cut jobs, forcing others to step in. The appliances unit found itself being gouged by the Kenmore unit, so it bought wares from LG, a South Korean conglomerate, instead.
Ten years ago, the department-store chain operated 3, stores. By February, Sears' and Kmart's combined stores are expected to fall to just locations. Things didn't always look so bleak for the retailer.
Officially founded in , Sears was once the world's largest retailer, reporting billions of dollars in profits. With a headquarters located in the Sears Tower, once the tallest building in the world, Sears' influence was known worldwide. However, changes in consumer behavior and the retail landscape has resulted in the demise of one of the United States' most storied department-store chains.
Here is a timeline of the rise and fall of Sears, starting at its humble beginnings in the s. A railroad station agent, Sears started the mail-order watch and jewelry company as a way to supplement his income. Sears relocated his business to Chicago in and, shortly after, hired Alvah C.
Roebuck as a watch repairman. Sears sold his watch business in In , he founded another mail-order service with Roebuck, which the two named Sears, Roebuck and Company. After being purchased and reorganized by clothing manufacturing mogul Julius Rosenwald, the company began to grow exponentially.
The company specialized in selling low-cost merchandise to rural areas that did not have access to stores. These would-be customers would receive the Sears catalog in the mail. The catalogs shot the company to insane popularity, with many comparing its rise to fame to that of Amazon. Similar to a "no money down" offer, customers could send their Sears catalog ads to a company, receive the product, and pay for it once it arrived and they had inspected it.
In , Sears became the first major US retailer to sell its stock in an initial public offering. By , Sears had regained financial stability. Rosenwald stepped down as Sears president in , after which he dedicated his life to philanthropy. He donated millions of dollars to public schools, colleges, universities, museums, Jewish charities, and black institutions. In , Wood officially became president of Sears, Roebuck and Company. He would stay on at the company in various high-level positions until his retirement in The first retail location set off a massive chain reaction of store openings.
Seven more stores opened in alone, and by , in-store sales had topped mail-order sales. Sears also founded its Allstate Insurance Company in as a response to the rise in automobile ownership. Relatively unphased by the crash of and the subsequent Great Depression , Sears sales continued to hold steady. Sears was one of the first department stores to cater to both men and women , as well as sell household goods and appliances. According to History , the Sears name soon became "synonymous with the suburban shopping experience.
With an increased focus on suburban living, Sears began to pay more attention to its automobile ventures. The company had been selling cars as far back as , but this stylish ride was certainly an upgrade from its motor buggy. Upon its completion in , it was the tallest building in the world. It would hold this title for more than 20 years. The Sears Tower, which was renamed the Willis Tower after 36 years, was used as an office for Sears' main merchandising group and company headquarters.
Space in the building was also rented to outside tenants. According to the New York Times , the retailer had over , employees in its ranks and was able to provide many of them a clear path to the middle-class. Jim Rice, a senior vice president with Creditntell, said in an interview that Transformco's current Sears and Kmart footprints might not be enough to support overhead costs for the banners.
Moreover, Sears and Kmart's supplier base has likely diminished along with their footprints. Rice said he has received fewer inquiries from those interested in selling to Sears in the time since it emerged from bankruptcy. Customer traffic remains severely depressed as well. Diminishment seems like an eternal state for Sears, defying mathematics and logic.
Surely if Sears and Kmart keep closing stores they will reach zero eventually — right? Older generations can recall a very different trajectory for Sears, which was formed out of a partnership between Richard Sears and Alvah Roebuck, originally to sell watches and jewelry to America's far-flung towns.
By the early s, the Sears catalog sold women's garments, guns, fishing tackle, bicycles, baby carriages, musical instruments and even houses, along with a whole lot of other things. It was also an early pioneer in consumer credit plans and launched its own iconic brands, including the Craftsman brand of tools. Starting in , Sears began building brick-and-mortar stores, adding hundreds within just a few years. By , retail sales passed its catalog revenue.
Erik Gordon, a professor at the Ross School of Business at the University of Michigan, noted in an interview how Sears "early on, saw suburbanization and shopping malls as an opportunity — and they saw it as such a big opportunity they built malls. Sears developed into a multifaceted mammoth. Along with its catalog and retail business, and private brands, it housed among other units an insurance company, a real estate company and a credit card Discover , all of which were eventually spun off.
You look at it and think, 'Oh my goodness, they were Amazon. Not long after Lampert and his hedge fund ESL Investments took over Kmart, following the latter's bankruptcy in the early s, he merged the discount store with Sears in a move to expand the product range of both stores and accelerate Sears' off-mall strategy.
But both banners went into the merger with longstanding existing issues. Sears was tied to a department store sector in decline amid the rise of big-box players and off-mall shopping. Sears' decision to fold its catalog business in the early s was also a fatal mistake, coming as it did right before the rise of e-commerce, a form of digital catalog retail, in Egelanian's view.
Or as Gordon puts it: "They knew about fulfillment. Sears had management issues back then as well, long before the arrival of Lampert. Meanwhile, Kmart had been thoroughly out-competed by Walmart in its sector over the preceding decade. Egelanian attributed this to Walmart's more efficient distribution system, which the low-price leader invested in while Kmart was making ill-fated acquisition bets on box retail in the s. Once Lampert came on as chairman of Sears Holdings, and later took over the chief executive role, the company undertook some of the most complicated and thorough financial engineering the industry has ever witnessed, and which has now become infamous among retail observers, as well as the target of litigation.
The company spun off the Lands' End brand, which ESL now majority owns and has wound down its relationship with Sears.
About five years later, in , Sears Canada went bankrupt and liquidated. Sears also spun off hundreds of its choicest owned properties into a real estate investment vehicle, Seritage Growth Properties, in which ESL holds a substantial interest. Over time, though, Seritage has leased out properties once rented by Sears to other retailers. As of the turn of the year, Seritage has no locations leased to Sears or Kmart. Litigation and Lampert remain its only ties to the Sears name.
Lampert also loaned Sears Holdings hundreds of millions of dollars on multiple occasions, and took in money from the company on interest payments and fees.
Along with the web of assets, Sears Holdings — back when it had money — regularly doled out millions to shareholders in the form of buybacks and made substantial financial bets with its cash. A good case can be made that the buybacks left Sears with less cash to invest in its business when the industry started undergoing rapid technological and competitive changes. Lampert is a "mastermind of the corporate rule book," in Egelanian's view. Many share that view, and it has fueled court fights.
Lampert and a host of associates and controlled companies are defendants in a lawsuit filed by Sears Holdings and unsecured creditors to the old Sears. With the creation of Tansformco, Lampert cut ties with Sears Holdings. Their complaint against Lampert and others is filled with fiery language even for an adversarial legal action.
Pointing to the Lands' End and Seritage spinoffs, they accused Lampert and other shareholders of "thefts of assets," "rank self-dealing" and "numerous other breaches of fiduciary duty. The plaintiffs alleged that "[a]ltogether, Lampert caused billions of dollars of cash and other assets to be transferred to himself, Sears Holdings's other shareholders and other third parties," and beyond the reach of creditors.
In the plaintiff's view, Sears Holdings was insolvent going all the way back to , if not earlier. Lampert and other defendants "knew this but nonetheless continued to pursue further asset transfers for their own enrichment" as the company posted massive losses and rosy projections in budget plans, the complaint alleges. At the time an initial lawsuit was filed , ESL said in a statement that it "vigorously disputes the claims" against it and Lampert, which the firm said "repeats baseless allegations and fanciful claims.
While Sears Holdings spun off assets, it also went through wave after wave of store closures as its retail business weakened and sales fell. And the shrinking and asset sales continue today under Transformco. In January, for example, the company sold off five Kmart leases to Target.
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