Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcy

Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcy

Summary

The end of Sears has been predicted by retail analysts for a longtime. Not long after Kmart and Sears merged to create the Sears Holdings Corporation in 2004, revenues began to slide and have been doing so at gathering speeds ever since 2007.

Many factors are responsible, but most fundamentally the company is not being run in a way conducive to survival, even though potential escape routes exist. Many problems can be traced back to the CEO, Eddie Lampert.

Failure at the top of the company to summon suitable solutions to longstanding problems is the most fundamental of them all. Sears remains a trading company, for now. Unless radical action is taken very soon the brand will soon cease to exist altogether.

Key Highlights

- The creation of Sears Holdings Corporation by the merger of struggling retailer Kmart with Sears (although in effect the deal was a Kmart takeover of Sears) was supposed to provide both retailers with economies of scale and integration of products to compete against Walmart and other firms.
- How the company is organized exacerbates the problem further. Shortly after Lampert took over, each business unit was organized to function as an autonomous company would do.
- Most observers of Sears have struggled to discover potential means of the company being saved from expiring ever since it was formed.

Scope

- Assesses the impact of the Kmart and Sears merger
- Looks at the role of CEO in the company
- Examines the financial situation the company is in
- Examines the current strategies in place
- Assesses the need for store investment
- Looks at potential rescue plans

Reasons to buy

- What impact did the merger have on business?
- Can the company ever be turned around?
- Why is investment in stores necessary?
- Was selling of assets correct?
- How much is the CEO to blame for a decline in fortunes?
Overview 2
Catalyst 2
Summary 2
Creation of Sears Holdings Corporation has not matched predictions of success 6
Original merger deal had major failings from the beginning, exacerbating problems 6
Some analysists predicted failure; others anticipated success 7
Predictions of success were based upon sound reasoning, but proved to be wrong once reality bit 8
Eddie Lampert is failing as a CEO, thwarting any prospect of recovery 9
Management style is bad for decision making and lacks leadership 9
Lack of trust from CEO prevents suitable decision making processes from forming 10
Unwillingness among board members to remove Lampert is a big failure of leadership 11
financial situation of Sears reducing survival chances 12
Selling products on Amazon is forward thinking but scale is lacking in ambition 12
Valuable assets are not being managed correctly to benefit whole company 13
Sears has few assets remaining, deterring any potential deal to save core business 13
Investment in stores should have occurred before debt became crippling 15
Dwindling financial resources and poor strategy are hastening decline of Sears 15
Suppliers are reported to be nervous about supplying Sears 16
Perilous financial situation means large-scale investment in stores is highly unlikely 16
Despite dire circumstance, suitable turnaround plans could work 18
Sears Canada could have been saved according to former executive chairman 18
Public image of Sears needs to be restored for a turnaround to happen 19
Better use of assets is now essential to stave off bankruptcy 19
Reform of Shop Your Way needed to convince customers change is coming 19
Conclusions 21
Riddled by problems, Sears will soon cease trading unless radical action is undertaken 21
Appendix 22
Sources 22
Further Reading 22
Ask the analyst 23
About MarketLine 23
Disclaimer 23

List Of Tables

List of Tables
Table 1: Board members of Sears Holdings Corporation, 2017 10

List Of Figures

List of Figures
Figure 1: Sears and Kmart merger 6
Figure 2: Sears Holdings Corporation revenue ($bn) 2005 to 2017 7
Figure 3: Eddie Lampert 9
Figure 4: Sears and Amazon logos merged 12
Figure 5: Craftsman to be sold at Stanley Black & Decker 13
Figure 6: Sears Holdings Corporation profit/Loss ($m) 2005 to 2017 15
Figure 7: Sears store closing down 17
Figure 8: Brandon Stranzl, former executive chairman of Sears Canada 18
Figure 9: Sears Shop Your Way 20

Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcy

Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcyThe end of Sears has been predicted by retail analysts for a longtime. Not long after Kmart and Sears

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