Categories Analysis, Markets, Retail

Lampert’s efforts to keep Sears alive might go in vain

Sears Holding Corp. (SHLDQ) has got a lifeline from Chairman Eddie Lampert that might save it from liquidation. According to a report by Reuters, Lampert has put forth a revised offer worth close to $5 billion to buy the troubled retailer out of bankruptcy. Sears had rejected Lampert’s previous offer of $4.4 billion.

Along with the new bid, which was sent through an affiliate of his hedge fund ESL Investments Inc., Lampert submitted a $120 million deposit. The chairman is said to have agreed to take on $300 million of tax and merchandise bills that Sears has incurred since its bankruptcy filing in October.

Lampert’s proposal will be evaluated by Sears in a bankruptcy auction set to take place next week and if it fails to go through, he will lose $17 million from the $120 million deposit to Sears’ creditors. Only Lampert’s offer will help keep Sears alive as a whole, others call for breaking up the company and liquidation.

The question is even if Lampert pulls Sears through, can it really bounce back? Sears has deteriorated, not just over years but decades. The retailer’s sales continued to fall and it did not invest adequate money or resources to turn things around when it should have. Unprofitable acquisitions along with improper cost-cutting and divestments added to its woes.

Relief for Sears after chairman’s buyout bid gets court nod

Sears fell way behind its peers like Amazon (AMZN), Walmart (WMT), Target (TGT) and Kroger (KR) and this was because the company failed to keep up with the changing trends, namely ecommerce. Even though Amazon rules the online space, other retailers have invested substantially in their digital capabilities and new technologies.

Retailers are even teaming up with technology companies to revamp their shopping spaces. Walmart and Kroger partnering with Microsoft (MSFT) for high-tech grocery stores is an example. Sears has failed to catch up on these kinds of initiatives.

Even if Lampert takes over Sears, the chances of the company surviving for long are less. Sears would need a massive change in strategy and huge investments to keep up with the current trends in the retail industry, something the company might not be able to afford. The best option at present might be to liquidate the company and sell off its assets so that losses can be mitigated as much as possible.

 

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