Sears Bankruptcy Holds Lessons for Retailers (Even Amazon)
*By Carlo Versano*
Sears's Monday bankruptcy filing had less to do with any strategic plan to restructure and more to do with a cold fact: the company had simply run out of cash.
That's according to David Tawil, the distressed debt investor and president of Maglan Capital.
Tawil told Cheddar that while he shares the mainstream view that Sears ($SHLD) chairman and now-former CEO Eddie Lampert mismanaged the company, he gives the businessman credit for attempting to rebuild it through bankruptcy into a profitable, if much smaller, operation.
"That's a testament to Eddie Lampert's conviction," Tawil said ー though there is serious skepticism on Wall Street that Lampert will be able to pull off such a feat.
Sears may have a shot at staying alive just by being "the last man standing" in a forlorn brick-and-mortar retail space, Tawil said. He also said he anticipates JCPenney ($JCP) will be the next department store chain to fall.
At this stage, investors may want to assign blame ー and in the view of Women's Wear Daily deputy managing editor Evan Clark, Sears's misfortunes fall squarely on Lampert.
"He came at the business with the eye of a financier," and not that of a retailer, Clark said in a separate interview on Cheddar.
Lampert was in charge of the company during its slow decline over the past decade. As part of the restructuring, Sears will close more than 140 stores, and Lampert will step down as CEO.
Lampert reportedly hopes Sears can reemerge from bankruptcy with a smaller footprint, but a liquidation seems a more likely outcome to many.
Even President Trump responded to the bankruptcy with a dig at Lampert, saying Sears had been "improperly run for many years."
Indeed, Lampert made his bones as a hedge fund boss and won accolades on Wall Street for what seemed like savvy moves at the time: merging with Kmart for $11 billion (Lampert was Kmart's largest shareholder), spinning off popular brands like Lands' End ($LE), selling real estate, and cutting costs. He was even touted on the [cover of BusinessWeek](https://www.businessinsider.com/sears-ceo-eddie-lampert-failed-because-activist-investing-is-flawed-2018-4) as "The Next Warren Buffett."
But in hindsight, his financier's approach helped doom the mother ship, according to Clark. In particular, Lampert's refusal to invest in Sears stores unless he could guarantee a return led to a deteriorating in-store experience that shoppers noticed.
"You have to want to walk into the store," Clark said. And it's been many years since customers wanted to walk into a Sears.
Of course, Sears also faced headwinds from Amazon ($AMZN) and the decades-long shift to e-commerce that, like many of the company's one-time competitors, Sears utterly failed to match.
The irony, perhaps, is that Sears was "the Amazon of its age," as Clark put it.
The 125-year old company pioneered the idea of using the postal service to deliver products ranging from tires to toys to even the most far-flung rural communities. Americans of a certain age still fondly remember when the Sears Roebuck catalog, often 1,000 pages or more, would hit the mailbox with a thud.
Monday's bankruptcy filing is a cautionary tale that holds lessons for high-flying retailers, Clark said. Companies that aren't "maniacally" focused on the customer cannot succeed. Even Amazon needs to be able to sense changing winds and an evolution among consumers. "Trees don't go to the sky," he noted.
"It's much harder to stay on top than it is to get on top."
For full interview [click here](https://cheddar.com/videos/sears-is-filing-for-bankruptcy-but-which-retailer-will-be-next).
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