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Sears survived bankruptcy. Can it survive long term?



The dealer arises from bankruptcy a smaller and economically healthier company. But it is not clear whether Sears will enjoy a second life, or if another bankruptcy and permanent closure await in the future.
The retail cemetery is full of companies like RadioShack and Gymboree that arose from bankruptcy and then filed for once in relatively short order.

Many companies have come out of bankruptcy and gone on to financial success. For the past 20 years, General Motors, Chrysler and most of the country's largest airlines have used the bankruptcy process to transform their business and report record profits.

  Why does Eddie Lampert want to keep Sears alive?

The new Sears will only have a fraction of the debt burden that the old company fought for. Most of the 425 stores that are part of the sale were profitable right up to bankruptcy proceedings. The other stores gave dizzying losses.

Most of the remaining stores are in California, the Northeast, the Middle Atlantic, the Florida and the Texas areas where the country has higher prices. These real estate prices can stave off competition from major boxing competitors, such as Walmart. And Sears can sell off some of its stores to raise money and pay off more debt.

The company stated in the bankruptcy law that it expects to raise at least $ 650 million from real estate sales over the next three years.

The company also expects to make some business strategic changes. It will place greater emphasis on its "Shop Your Way" customer loyalty program, which allows customers to accumulate points. Customers can use these points at restaurants, merchants, and other retailers. Sears claims the program increased sales last year.

Sears also intends to switch to smaller stores – about 12,500 square feet each, instead of the 160,000 square feet of a typical store that anchors a mall. It is not clear whether the company will reduce existing locations or move into smaller spaces.

There is another way to reduce costs: Fewer stores and more small stores mean less stock, so Sears can fill stores with desirable products. One of the most important customers draws Sears has been missing.

If the Sears posts deserve the future, it doesn't have to worry about paying taxes in the coming years. The latest losses – more than $ 12 billion since its last profitable year in 2010 – will hide future tax revenues. There is a reason why General Motors, a decade removed from the bankruptcy, still pays a few federal taxes, even though it has since made millions of dollars and posted record profits.

Why Sears can still fail

[19659009] Sears & # 39; problems go back decades and they are not washed away with a healthier balance and a smaller footprint of stores.

It has been lost for decades to major bookstores, such as Walmart ] WMT ) Target ( TGT ) ] and Home Depot ( HD ) . These rivals offer a wider range of goods and lower prices. That disadvantage does not disappear with Sear's emergence from bankruptcy. The growth of online shopping and the dominance of Amazon ( AMZN ) only increases competition problems.

Business plans that project profitability provide some very aggressive assumptions about cost reduction, especially on administrative costs. Its ability to win profits depends on meeting these goals.

Sears has a story of predicting profitability and then posting huge losses. The track track was spotted by lawyers representing their creditors during the week's bankruptcy.

Sears is also leaderless. This week, the company revealed that Lampert, who had served as CEO from 2013 through the day of bankruptcy filing, would not return to the helm. An archive from Lampert's hedge fund said it wanted to hire a CEO "with a proven track record to carry out large-scale dynamic transformations."

But Lampert will still be the majority shareholder in a private enterprise and the one who calls the shots. Bankruptcy Judge Robert Drain cited criticism on Thursday, noting that some consider Lampert a cross between a 19th-century robber baron and a bumbling sitcom character.

He has the opportunity not to be a cartoon character, to act Drain said.

Finding a senior director who is willing to work for him will be a challenge in itself. And then the CEO must turn around for Sears.


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