The Decline and Fall of Sears

After five years of steady and unstoppable decline, it looks like Sears is finally calling it quits. Yet another American icon falls.

The end of Sears is more than just the death of an American corporation. It signals the death of a way of life. Sears was once the mightiest of the mighty of retailers. It changed how Americans shopped both in stores and through the mail and symbolized a nation that no longer exists.

Most people made their own clothes when Sears launched its catalog in 1888. Many Americans even made their own furniture. Sears and its other national retailing competitors, Montgomery Ward and JC Penney, changed all that. The stores introduced conveniences such as washing machines, refrigerators and other household appliances as well as a full line of affordable clothing.

After World War II, the America of small towns and cities became suburban America thanks to these great retailers. They also gave birth to another disappearing icon, the shopping mall.

Sears was once the greatest retail employer in the nation. It was both the Walmart and Amazon of its day. But, the end of the 20^th century brought the beginning of the retail icon’s end.

Like no other business, retailing has always been the survival of the fittest. Sears unfortunately couldn’t survive. The big-box competitors like Home Depot, Costco and Walmart offered more variety at lower prices. And, in the last 20 years Amazon finished Sears off by offering their brands over the Internet.

Sears didn’t fail for want of trying. CEO Eddie Lampert, a successful hedge fund operator, tried a number of things but none of them worked. When Sears was riding high in the early 1990s, Sears added to its business portfolio by acquiring the Discover credit card, Coldwell Banker real estate, and the stock brokerage firm of Dean Witter Reynolds. But ultimately these attempts at diversification only served to distract Sears from its failing core business.

The first warning sign of the eventual demise of Sears came in 1992 when they posted a loss of $4 billion, and gave investors their first wake-up call. A new strategy was created by then CEO Arthur Martinez. Among the changes was the discontinuation of the catalog which at the time was losing $100 million a year. Sears also sold it Chicago world headquarters building, the largest skyscraper in Chicago. A number of new experimental formats were created, but none ever went anywhere.

In 2004, Lampert took control of the company. One of the first things he did was acquire Kmart, which was also a troubled retailer.

Among the assets Sears values the most are some of its high market share brands such as Kenmore and Whirlpool appliances, Craftsman tools, Land’s End apparel and DieHard automotive products.  Amazon offers all these brands today over the Internet.

Despite all it seemingly had going for itself, Sears still couldn’t make it. Many Sears stores fell into disrepair, and the corporation continued to close far more stores than it opened. And each time it had to report its earnings they always seemed lower than the quarter of the year before. The death spiral has continued to the point where its stock has fallen to under $10 a share.

Sears started the bankruptcy journey with Chapter 11 reorganization, but this is just the start of a process that will most likely result in Chapter 7 liquidation—with the disappearance of yet another American retail original.