The mysterious side of Sears
In 2005, Sears Holdings boasted almost 3,500 stores, many of them full-line. Today, 11 remain. The fact that any remain at all comes as a surprise to many, who have long assumed the company was dead as a physical retail presence. The company that operates these stores in 2024, Transformco, is mum on it’s intentions. Is Sears trying to make a comeback, as some say, or is the operation of these dated locations simply a means to a profitable real estate end?
On a recent picture postcard Southern California day in March 2024, I entered a Sears full-line store in Whittier, California. It was sunny and bright blue outside, with fluffy white clouds above the 4 story former Broadway location that has been operating as Sears since 1996. I’m not totally certain how I became fascinated with Sears, other than an interest in history and a fascination with underdogs; in any event, here I was, about to cross the threshold and travel back in time to the late 90s. Inside, the air was still, with an aroma of starch and dust. It wasn’t unpleasant or moldy, as I had heard was the case at other locations. The sales floor was nearly empty, save a handful of employees and a customer or two. In the center stood the check stand area, with it’s warranty information dated to 2018. The 2nd floor was closed (I had been up there to walk amongst the exercise equipment and islands of softlines gondolas in a past visit) and the escalator, with it’s incessant automated safety message, was not functioning. On the ground floor, swimwear was for sale, along with some ill-fitting jeans. In the appliance section, it was a big event that a new appliance had arrived for sale (I’m pretty sure it was a dryer).
“We are expecting new merchandise soon,” an employee shared. I hope that her optimism was not misplaced. A Sears in Palm Beach Gardens in Florida had closed unexpectedly in early March with no warning to staff or customers. As I did on each visit, I stood in the store, taking in the view, reading the signs asking me to “Rediscover Sears” and marveled that such a mighty company had fallen to the point that a single new appliance was a big event. How did this happen? Why are 11 stores still being operated, without distribution centers and with seemingly no meaningful corporate support, beyond the bare minimum? So many questions for the curious mind.
It wasn’t always this way. Sears was once a proud company, the number one retailer in the United States and a true national institution. Richard Warren Sears had gotten his start in 1886 selling discarded watches in a train station. He loved selling and soon enough grew his side gig into a large business with the help of Alvah Roebuck, who was as Frank Wells was to Disney’s Michael Eisner, the money man who focused on paying the bills while Sears kept hustling. The history is extensive, and is well documented at the Sears Archives website (http://www.searsarchives.com/). Sears pioneered the catalog business, allowing rual customers to have their very own slow-paced version of Amazon back in 1893. You could order just about anything from Sears via the thick book; everything from cars, to guns to houses. The houses were built using a kit and many are still around today. The company was so successful that it built the Sears Tower in Chicago, which in its day was the tallest building in the world. As written in the archives, “The 110-story Sears Tower became the world’s tallest building at 1,454 feet when it was opened in 1973. The staggering amount of materials needed to construct the building included 76,000 tons of steel, 2 million cubic feet of concrete, 16,000 tinted windows, 1,500 miles of electrical wiring and 80 miles of elevator cable.” This was no small company and was the number one retailer in America until 1991, when it was passed by Walmart, a decidedly down-market competitor.
In 2005, Kmart purchased Sears, led by the hedge fund wizard Eddie Lampert. This was after years of decline, Sears having taken their eyes off the ball by focusing on seemingly everything besides their greatest strength, hardlines, also known as tools and appliances. An ill-fated attempt to push apparel through the “Softer Side of Sears” campaign ultimately failed when the purchasing department couldn’t keep the promises of the marketing team. The emperor had no clothes, so to speak. Sears Holdings, as the combined company would be known, as ready to take on the world. Sears had long been saddled by it’s mall locations, which were just not as convenient as Walmart and Target. By merging with Kmart, Sears should have an advantage, since most Kmart locations were off-mall and in strip malls and power centers around the country. Fast Eddie, as many call him, was ready to spread the gospel of “integrated retail.” Members (don’t call them customers, employees soon learned, unless you want to be yelled at via teleconference) could shop in store and online, seamlessly. On paper, it made a lot of sense. However, Mr. Lampert was no retail expert. He had successfully made money with AutoZone using his methods, but Sears is not AutoZone and his devotion to the dogma of Ayn Rand didn’t exactly breed espirt de corps amongst the hundreds of thousands of Sears employees. He divided his departments into silos, doing the exact opposite of what most in business would advise. Eddie knew better, and he would transform the company into something different, a data-based powerhouse that would sell you the exact blouse you were thinking about yesterday and a washer and dryer combo in which to lander it in.
“Turnarounds happen when a company succeeds again at doing what it had once done successfully before. Transformations are almost entirely different — they occur when companies adapt their business model to fundamental shifts in technology, competitive landscapes, government policies and regulations, or macro trends to serve their customers (or, in our case, members) in new ways,” Lampert wrote in blog post in May 2014, four years before Sears Holdings would declare bankruptcy.
This transformation Lampert speaks of is the heart of the controversy over Sears. There is a great deal of anger towards Lampert, who famously is said to have seldom visited corporate headquarters in Hoffman Estates, Illinois outside Chicago preferring to lord over the employees like the Wizard of Oz via teleconference. He was perhaps excessively thrifty, not wanting to spend money on the stores unless they could somehow prove they could make the money back. It was as if he was saving a drowning man by telling him to just swim, regardless of the tidal shifts in the market.
There are many who claim Lampert’s real game was to half-heartedly run Sears, starve it for resources and sell and profit from the real estate bones when the inevitable happened. I personally think this is too simplistic, and that he likely did try to make a real go of it for a time, but at this point in 2024 the facts of the mystery are quite bewildering:
- The Transformco website is wildly out of date, with the last blog post in 2021, announcing a store closure.
- There are no retail support jobs on the Transformco career page, meaning that aside from a handful of folks such as Head of Product and Retail Operations Ramon Marquez, it appears there is little in the way of corporate focus on retail.
- Signage throughout the store in Whitter has tracking dates on the bottom from years ago, in one case 2009, suggesting that no new marketing material is being created.
- The reopeing of a store is usually a big event. When Sears reopened one store each in Washington and California, there was very little fanfare.
- Stores market themselves on Facebook.
- The social media presence of Sears pretends the stores do not exist.
Considering these facts, why are the stores open? A legal filing involving Kmart suggests an answer:
“Boutrous responds that section 24 of the Kmart Lease provides that if Transform is in default, Boutrous, after giving proper notice, may “re-enter [the] demised premises by summary proceedings or otherwise.” Boutrous also argues that the eviction action falls squarely within the statute’s substantive and procedural requirements, and that summary eviction under N.D.C.C. ch. 47–32 was straightforward since Transform was not occupying the property, having closed the Kmart store a year before the eviction hearing. Boutrous contends Transform was entitled to take full advantage of any procedures available in the district court, and much of the delay was attributable to Transform’s litigation strategy.” Basically, if Transformco does not operate the store, then they are in violation of the lease and could lose control of the property. This might explain the comically tiny Kmart that is operating in Miami. Having considered the mystery for some time, put plainly as “why is Sears still operating 11 stores, with little corporate support and with increasingly sparse merchandise?”, I have come to the conclusion that at this point Eddie Lampert is only operating the stores as part of his real estate strategy to hopefully make some money out of this deal he tanked with his own apparent inability to make an enduring success out of this once great company. The tragedy of the matter is that Sears and Kmart once provided thousands of solid jobs, with benefits and even pensions, and now is left a mere shell of it’s former self, slowing wasting away in full view like an abandoned boat in a seldom visited side lot. I’d love Eddie to tell me and the doubters that I am wrong. But that would require him making a public statement, something he has been loathe to do in 2024. Perhaps there is nothing left to be said.
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Sources: Sears Archives, Eddie Lampert’s personal blog, Institutional Investor https://www.institutionalinvestor.com/article/2bsxn8l0u5yr6zhelmhog/corner-office/eddie-lampert-shattered-sears-sullied-his-reputation-and-lost-billions-of-dollars-or-did-he