Sears a "case study" in how not to run a retailer

By Aimee Picchi

/ MoneyWatch

The fall of Sears

While Sears' immediate fate remains uncertain, as former owner Eddie Lampert tries to pull off a last-ditch bid to buy the bankrupt retailer, its epitaph is already being written.

"Sears will now act as a case study in how not to run a retail operation," said Neil Saunders, managing director of GlobalData Retail. "It also serves as an example that even the once most powerful and cutting-edge of brands can easily fail in a retail environment where change and evolution are the order of the day."

Certainly it's not the legacy that company founders Richard Warren Sears and Alvah Curtis Roebuck might have predicted when they opened the store in 1893. So what laid Sears — a survivor of depressions, recessions and other economic calamities for more than a century — low?

"Incredibly poor strategic decisions, chronic underinvestment and continuous financial machinations designed to keep the company afloat," Saunders said.

More time?

The 126-year-old retailer on Tuesday was set to ask a bankruptcy court's permission to move forward with a planned liquidation, but Chairman Eddie Lampert has been granted more time to advance his $4.4 billion takeover bid, according to media reports.

Lampert's hedge fund, ESL Investments, now has until 4 p.m. Wednesday to pony up a $120 million deposit on his offer, CNBC reported. With its future hanging in the balance, Sears shoppers are asking exactly went wrong. For its part, Sears tweeted that it's "not out of the race just yet. Don't count us completely out."

We would say that as well, but we are Marathon Runners, and we are still running. We may be slowing down, but we are not out of the race just yet. Don't count us completely out. Happy Shopping! -SMT

— Sears (@Sears) January 7, 2019

Failing to adapt

Understanding how Sears got to this point goes back to 2004, when Kmart announced it would buy Sears for $11 billion. Sears was already troubled, but hedge fund king Eddie Lampert engineered the merger, arguing that the two retailers could somehow make each business stronger.

By 2009, Lampert said he believed an overhaul of Sears' culture was necessary to keep up with Amazon and other online rivals, he recently told The New York Times in an interview. But his digital transformation was marred by store leaders and managers who failed to embrace the efforts, he said.

At the same time, reports surfaced about Lampert's management style, which was reportedly based on the ideas of novelist Ayn Rand. Division heads competed for resources and money, leading to infighting, according to Bloomberg News.

In 2013, Lampert took over as CEO, a role he told The New York Times he only expected to remain in for a few months. He said he attempted to be the company's "catalyst," not its "operating person."

How Sears went from innovation to bankruptcy

But Sears clearly needed a strong operations chief at the helm. The retailer lost a massive $1.4 billion in 2013, while its same-store sales in the U.S. declined by $600 million. At the same time, the store decreased its inventory levels in order to cut back on expenses, but that meant fewer merchandise choices for its customers.

Those decisions fed into a vicious cycle of declining revenue and mounting losses, with consumers getting fed up with empty shelves and poor service. By 2016, a survey of women shoppers found they preferred to shop at Goodwill to Sears.

With dwindling sales and mounting losses, debts ballooned, paving the way for a credit crunch and Sears' bankruptcy in October.

Neglecting the brand

After filing for bankruptcy, Sears said it would close more than 140 stores and focus on winning back customers. The store's chief brand officer acknowledged to CBS News that the chain faced significant hurdles in convincing customers to shop there over the holidays.

"We have to leapfrog off many years when we weren't investing in the brand, to let people know that Sears and Kmart are relevant again," Sears brand chief Peter Boutros said.

But the effort may have been too late, with reports that foot traffic declined at Sears and Kmart at the start of the holiday season.

"This is a tale of avarice, greed, incompetence and stupidity," Mark Cohen, former Sears Canada CEO, told CNBC on Tuesday, who added he blamed Lampert for the company's demise. Creditors "see right through the fact that there's no future for this company."

First published on January 8, 2019

© 2019 CBS Interactive Inc.. All Rights Reserved.

Stocks climb on optimism over U.S.-China trade talks

Investors have become notably more hopeful about an eventual deal, a sharp reversal from previous months

updated 1M ago

Trump to give prime-time address to the nation — live updates

It will be his first time addressing the nation in prime time from the Oval Office

updated 4M ago

Ex-felons in Florida begin registering to vote as amendment takes effect

Until Amendment 4 passed, Florida's constitution automatically barred felons from being able to vote after leaving prison

updated 5M ago

Joshua Tree National Park to temporarily close to fix damage during shutdown

The National Park Service said the closure set for 8 a.m. Thursday follows incidents of off-roading and destruction of the park's namesake Joshua trees

updated 7M ago

12-week-old puppy revived with Narcan

Kash, a Labrador and pit bull mix, is now looking for his forever home

updated 39M ago

Trump to give prime-time address to the nation — live updates

It will be his first time addressing the nation in prime time from the Oval Office

updated 4M ago

Ex-felons in Florida begin registering to vote as amendment takes effect

Until Amendment 4 passed, Florida's constitution automatically barred felons from being able to vote after leaving prison

updated 5M ago

Manafort filing reveals alleged campaign communications with Russian operative

Manafort's attorneys failed to properly redact their filing, revealing campaign contacts between Manafort and a Russian operative

updated 54M ago

How to watch Trump's prime-time address tonight

This is President Trump's first prime-time address from the Oval Office

updated 53M ago

Police investigating second death at Democratic donor's home

Democratic Party donor Ed Buck has contributed to various California races and causes

2H ago

Thousands protest longtime leader's rule in Sudan

Omar al-Bashir is one of the longest serving leaders in the region

1H ago

Hacker confesses to stealing data from German leader, other politicians

Officials said the hacker leaked the data because he was "annoyed" by some of the victims' public statements

1H ago

Flights resume at London airport after reported drone sighting

Officials said Heathrow Airport suspended departures as precaution

1H ago

"El Chapo" hitman kept a soundproof "murder room," witness says

"He took me once to a house, where the floor was just white, tiled," the witness reportedly said of "Jaguar"

4H ago

U.S. Navy veteran reportedly jailed in Iran since July

State Department won't confirm arrest of Californian Michael White, but he would be at least the 4th U.S. national locked up in the Islamic Republic

4H ago

Regina King gets support for her Golden Globes vow

In her acceptance speech at Sunday night's Golden Globes​, King vowed to hire 50 percent women for all her production projects going forward

2H ago

Kevin Spacey pulled over for speeding after court appearance

Kevin Spacey pleaded not guilty to groping 18-year-old in first criminal case brought against disgraced actor

4H ago

Jackson endorses congresswoman's use of "motherf*****"

"I just wanna Wholeheartedly endorse your use of & clarity of purpose when declaring your (expletive) goal," the actor told Tlaib on Twitter

20H ago

Stars break gender norms at Golden Globes

When male stars hit the red carpet in sheer and sparkly tops, eye makeup and heels, it can be a beacon of light for trans youth throughout America

Jan 7

Christian Bale thanks Satan at Golden Globes

After saying he portrayed a charisma-free man reviled by everyone in "Vice," Bale suggested, "What do you think, Mitch McConnell next?"

Jan 7

Hacker confesses to stealing data from German leader, other politicians

Officials said the hacker leaked the data because he was "annoyed" by some of the victims' public statements

1H ago

Second grader wins Google Doodle contest

She's only in second grade, but she just got one step closer to fulfilling her dream of becoming a paleontologist

2H ago

Amazon surpasses Microsoft as most valuable U.S. company

Stock market's recent turmoil has shifted the fortunes of America's biggest companies as Apple falls to No. 4

19H ago

Running blind

A rare condition that left Simon Wheatcroft completely blind by age 27 has not slowed the marathon runner down, as he tests new technologies he hopes will help the visually-impaired

Jan 6

Everything you need to know about CES 2019

CES 2019 is days away. Here's how to follow the show

18H ago

Millions of Americans incorrectly think they have food allergies

New research suggests many adults who think they have a food allergy actually have an intolerance

3H ago

N.Y. Gov. Andrew Cuomo, Hillary Clinton tout stronger abortion rights

The Democrats shared the stage Monday at Barnard College in Manhattan to urge the codifying of abortion rights in New York state law

16H ago

Income volatility is bad for your wallet — and health

Unpredictable changes in Americans' income are on the rise and associated with higher risk of cardiovascular disease

20H ago

Is it a cold or flu? 5 questions to ask yourself

Here are some simple ways to help determine whether your illness is a cold or the flu

Jan 7

22-year-old with deadly disease loses disability insurance

Social Security sent Megan Willis a letter saying her health had improved and that she was able to work. It was news to her.

Jan 5

Stocks climb on optimism over U.S.-China trade talks

Investors have become notably more hopeful about an eventual deal, a sharp reversal from previous months

updated 1M ago

Sears a "case study" in how not to run a retailer

Although its former billionaire owner still wants to salvage the 126-year-old merchant, the damage is already done

updated 9M ago

What government shutdown means for mortgages

Many can expect minor delays — or worse — with the already complicated process of getting and managing a mortgage

updated 44M ago

Amazon pulls bath mats with Quran verses

Amazon stopped selling home product featuring Quran verses in response to backlash from Muslim civil rights advocates

2H ago

Eddie Lambert gets more time for Sears rescue, reports say

Retailer poised to seek bankruptcy court's OK to close hundreds of stores and end more than 50,000 jobs, media outlets say

updated 48M ago

Police investigating second death at Democratic donor's home

Democratic Party donor Ed Buck has contributed to various California races and causes

2H ago

Missing baby's "abduction" staged to hide foul play, police say

Police now believe King Jay Davila was never in the car his father said the boy was inside when a woman drove off

1H ago

Assailant sentenced for beating black man in Charlottesville

Daniel Borden was one of four charged with beating a black man on the day of a white nationalist rally in 2017

3H ago

"El Chapo" hitman kept a soundproof "murder room," witness says

"He took me once to a house, where the floor was just white, tiled," the witness reportedly said of "Jaguar"

4H ago

Kevin Spacey pulled over for speeding after court appearance

Kevin Spacey pleaded not guilty to groping 18-year-old in first criminal case brought against disgraced actor

4H ago