Kennedy: Sears, Kmart stores likely won’t come back

19Gazette

Now that Sears Holdings Corp. has exited bankruptcy, don’t expect to see shuttered former Kmart and Sears stores reopened.

That’s because Sears Holdings is really just a shell these days.

Created in 2005 when discounter Kmart bought department store retailer Sears in an $11 billion deal to combine forces against the likes of Walmart, Sears Holdings subsequently faltered, closing stores and selling off brands before filing for Chapter 11 bankruptcy protection in 2018.

A few months later, Edward Lampert, who as chairman of Kmart sparked the deal with Sears and then served as chairman and CEO of the combined Sears Holdings for a time, bought the remaining Sears and Kmart stores out of bankruptcy through his ESL Investments hedge fund, a big shareholder and lender to Sears Holdings.

Lampert put the stores and other purchased assets under a new entity named Transform Holdco, or TransformCo for short, which soon thereafter found itself repeating the same pattern of closing stores and selling off assets.

From the 223 Sears and 204 Kmart stores TransformCo got in early 2019, media reports peg Sears today at fewer than two dozen stores and Kmart at just three. (New York lost its last full-line Sears at Newburgh Mall in the Hudson Valley last month.)

When they combined to form Sears Holdings, Kmart and Sears had 3,500 stores to Walmart’s 3,000.

Head spinning yet? There’s more.

Soon after the TransformCo deal, Sears Holdings sued Lampert, ESL Investments and others in U.S. Bankruptcy Court, claiming the insiders “looted” the company for their own benefit, precipitating the Chapter 11 filing.

Other similar litigation followed naming other insiders who allegedly benefited from transactions that removed valuable assets from Sears Holdings, with the lawsuits effectively prolonging the bankruptcy proceedings.

Earlier this year, though, court-ordered mediation occurred, and over the summer a settlement was finally struck that will pay Sears Holdings $175 million in exchange for dismissal of the litigation, regulatory filings show.

That cleared the way for a reorganization plan, drafted three years ago, to be finalized. And on Oct. 29, Sears Holdings officially exited Chapter 11.

What remains in assets will be liquidated, which means some long-suffering vendors could see some payout.

In its 2018 bankruptcy petition, Sears Holdings checked a box estimating the number of creditors at “more than 100,000.”

Listed among the largest 20 unsecured creditors were names like Whirlpool, Frigidaire and Samsung. Another big creditor is the Pension Benefit Guaranty Corp., a government-chartered entity that takes over failed private pension plans.

And the remaining Sears and Kmart stores operated by TransformCo?

Their future may not be very bright, a Syracuse University professor of retail practice, Ray Wimer, told Fox Business last week, since the number of stores is small and indistinguishable from other retailers. 

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

Categories: Business, Opinion, Opinion

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