Sears Brand Check-up: Harvested for Cash, Starved of Stores
Sears built its name on the mail-order catalogue and opened its first store in 1925. As of November 26, 2024, its shares are long gone from Nasdaq and the brand sits with a private owner. We look at how Sears Holdings went from $53.0 billion in revenue in fiscal 2006 to Chapter 11 in 2018, and what the brand lost on the way.
Key takeaways
- Sears Holdings’ revenue fell from $53.0 billion in fiscal 2006 to $16.7 billion in fiscal 2017, its last full year before the October 2018 Chapter 11 filing.
- In fiscal 2017 the company spent $80 million on property and equipment against $332 million of depreciation and amortization, a sign that its stores were not being renewed as fast as they wore out.
- Cash came from selling what gave the brand its weight: properties and joint-venture interests sold to Seritage for $2.72 billion in 2015, and the Craftsman brand for about $900 million in 2017.
- For growing companies the lesson is plain: a brand harvested for cash without reinvestment loses customers long before it loses its name.
Download the full Sears Brand Check-up (PDF): vital signs, timeline, diagnosis, treatment and sources.
Symptoms: fewer shoppers, fewer stores
The last full year Sears Holdings reported before bankruptcy was fiscal 2017. Revenue was $16.7 billion, down from $22.1 billion the year before. Comparable store sales fell 15.2% at Sears and 11.4% at Kmart. The company closed about 435 stores in 2017 and finished the year with 1,002 Sears and Kmart stores. In fiscal 2006 revenue had been $53.0 billion.
The share price told the same story. Sears Holdings stock traded as high as $195.18 in the first quarter of fiscal 2007. In October 2018 Nasdaq moved to delist the shares, and trading shifted to the OTC Pink market under the symbol SHLDQ. They ended 2018 at about 27 cents.
Diagnosis: a brand run for cash
Sears began with a strong promise. Richard Sears offered his first catalogue in 1887, and the company built its business selling to farms and villages with no other convenient access to stores. It opened its first retail store in Chicago in 1925. It discontinued the general catalogue in 1993. In 2005 Kmart completed its purchase of Sears, a deal worth about $11 billion that joined about 3,500 stores. The company itself described the merger as joining “two of America’s oldest existing retail entities.”
What followed looks to us like harvesting. Capital spending ran well below depreciation: $80 million against $332 million in fiscal 2017, and $211 million against $422 million in 2015. Stores renewed that slowly tend to look tired, and shoppers notice.
The company also sold what gave the name its weight. In 2015 Seritage Growth Properties agreed to pay $2.72 billion for Sears properties and joint-venture interests, and Sears Holdings leased 255 of the properties back. In 2017 it agreed to sell Craftsman to Stanley Black & Decker for about $900 million. Each deal raised cash. None gave a shopper a new reason to walk in.
The annual report for 2017 set out a plan to “right-size, redeploy and highlight the value of our assets” on the way to “a more asset light, integrated membership-focused company.” That is a financial plan, not a customer strategy. Nothing in it tells a shopper why to choose Sears.
Bankruptcy and what was left
Sears Holdings filed for Chapter 11 on October 15, 2018. Eddie Lampert stepped down as chief executive and stayed as chairman, and 142 more stores were set to close. His firm, ESL Investments, was the largest stockholder and creditor. In the filing-day release Lampert said, “While we have made progress, the plan has yet to deliver the results we have desired.”
Lampert’s bid for the business was $5.2 billion, and Sears pension plans covering 90,000 people were 64 percent funded. On February 11, 2019, Transform Holdco completed the purchase of the go-forward stores and other assets.
The shrinking continued. In September 2021 Sears confirmed that its last store in Illinois, its home state, would close; its websites listed 35 Sears locations. In January 2024, as its last store in the New York area was closing, CNN reported that just over a dozen Sears stores remained in the continental US. By August 2024 demolition was under way at the former Hoffman Estates headquarters, a campus that once held about 9,000 employees.
Prognosis: a known name with little behind it
As of November 26, 2024, Sears is a private brand with no listed shares and few stores. Its main asset is recognition, and recognition fades without use. Any revival would need a clear position in a few categories and steady investment behind it.
What growing companies can learn
Brand value is earned slowly and spent quickly. If cost cuts or asset sales are funding the business, set limits on how far product, store and service standards can fall, and track comparable sales and repeat purchase next to cash. The balance between brand building and sales activation applies to what you keep investing in, not only to advertising. Sears shows what happens when a company spends its name instead of renewing it.
This check-up uses public information available on November 26, 2024. It is brand and marketing analysis, not investment advice.
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