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Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcy

Sears: Downfall of a giant. Suffering from fundamental problems, Sears nears bankruptcy

Summary

The end of Sears has been predicted by retail analysts for a longtime. Not long after Kmart and Sears merged to create the Sears Holdings Corporation in 2004, revenues began to slide and have been doing so at gathering speeds ever since 2007.

Many factors are responsible, but most fundamentally the company is not being run in a way conducive to survival, even though potential escape routes exist. Many problems can be traced back to the CEO, Eddie Lampert.

Failure at the top of the company to summon suitable solutions to longstanding problems is the most fundamental of them all. Sears remains a trading company, for now. Unless radical action is taken very soon the brand will soon cease to exist altogether.

Key Highlights

  • The creation of Sears Holdings Corporation by the merger of struggling retailer Kmart with Sears (although in effect the deal was a Kmart takeover of Sears) was supposed to provide both retailers with economies of scale and integration of products to compete against Walmart and other firms.
  • How the company is organized exacerbates the problem further. Shortly after Lampert took over, each business unit was organized to function as an autonomous company would do.
  • Most observers of Sears have struggled to discover potential means of the company being saved from expiring ever since it was formed.
Scope
  • Assesses the impact of the Kmart and Sears merger
  • Looks at the role of CEO in the company
  • Examines the financial situation the company is in
  • Examines the current strategies in place
  • Assesses the need for store investment
  • Looks at potential rescue plans
Reasons to buy
  • What impact did the merger have on business?
  • Can the company ever be turned around?
  • Why is investment in stores necessary?
  • Was selling of assets correct?
  • How much is the CEO to blame for a decline in fortunes?


Catalyst
Summary
Creation of Sears Holdings Corporation has not matched predictions of success
Original merger deal had major failings from the beginning, exacerbating problems
Some analysists predicted failure; others anticipated success
Predictions of success were based upon sound reasoning, but proved to be wrong once reality bit
Eddie Lampert is failing as a CEO, thwarting any prospect of recovery
Management style is bad for decision making and lacks leadership
Lack of trust from CEO prevents suitable decision making processes from forming
Unwillingness among board members to remove Lampert is a big failure of leadership
financial situation of Sears reducing survival chances
Selling products on Amazon is forward thinking but scale is lacking in ambition
Valuable assets are not being managed correctly to benefit whole company
Sears has few assets remaining, deterring any potential deal to save core business
Investment in stores should have occurred before debt became crippling
Dwindling financial resources and poor strategy are hastening decline of Sears
Suppliers are reported to be nervous about supplying Sears
Perilous financial situation means large-scale investment in stores is highly unlikely
Despite dire circumstance, suitable turnaround plans could work
Sears Canada could have been saved according to former executive chairman
Public image of Sears needs to be restored for a turnaround to happen
Better use of assets is now essential to stave off bankruptcy
Reform of ‘Shop Your Way’ needed to convince customers change is coming
Riddled by problems, Sears will soon cease trading unless radical action is undertaken
Sources
Further Reading
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Disclaimer
List of Tables
Table 1: Board members of Sears Holdings Corporation, 2017
List of Figures
Figure 1: Sears and Kmart merger
Figure 2: Sears Holdings Corporation revenue ($bn) 2005 to 2017
Figure 3: Eddie Lampert
Figure 4: Sears and Amazon logos merged
Figure 5: Craftsman to be sold at Stanley Black & Decker
Figure 6: Sears Holdings Corporation profit/Loss ($m) 2005 to 2017
Figure 7: Sears store closing down
Figure 8: Brandon Stranzl, former executive chairman of Sears Canada
Figure 9: Sears ‘Shop Your Way’

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