Sears Holdings Corp
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Republic of the Philippines BATANGAS STATE UNIVERSITY College of Accountancy, Business Economics and International Hospitality Management GRADUATE SCHOOL Gov. Pablo Borbon Campus 1, Batangas City, Philippines
Case Study Presented to the Faculty of the College of Accountancy, Business, Economics And Hospitality Management Batangas State University Batangas City
In Partial Fulfilment of the Requirements For the Masteral Degree of Business Administration
By: Kristine Angelie R. Belgado
Batangas State University
TABLE OF CONTENTS
Sears Holding Corp. ..................................................................................... 3 Analysis ........................................................................................................ 4 Toys R Us Inc. .............................................................................................. 5 Analysis ........................................................................................................ 6 References ................................................................................................... 7
A. SEARS HOLDINGS CORP. Sears Holdings Corp. (SHLD) filed for bankruptcy on October 15. Various remedies, including store closures and deals were made in desperate attempts to stay afloat, have also failed. In a statement, the company announced that its CEO, Edward Lampert, has stepped down and day-to-day operations will be managed by three high-ranking executives. Lampert will remain chairman of the board. The firm will remain the chairman of the board. The firm began the restructuring process after it failed to pay back $134 million that was due on October 15. The company also said it will begin closing an additional 142 unprofitable stores near the end of the year. It previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018. The Sears and Kmart chains have 894 US locations left, compared to a total of 3,500 between them when they merged in 2005. The bad news coming out of Sears has been steady to the point of being tedious. The company hasn’t just been shedding locations: In 2017, Sears stopped selling Whirlpool appliances, which it had carried since 1916. An internal company memo reportedly cited pricing conflicts. In August, Lampert offered to buy the Kenmore appliance brand for $400 million in cash through his hedge fund ESL Investments after the company failed to find other takers. ESL also offered to buy the Home Improvements business for $80 million in cash. “Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” said Lampert in the statement announcing the bankruptcy petition. “While we have made progress, the plan has yet to deliver the results we have desired, and addressing the Company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer. The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability.” Page 3 of 7
Analysis Sears is a well-known American retailer. When it was first launched in 1888, most people made their own clothes and even their own furniture. Sears introduced mass-produced items instead. New appliances, such as washing machines changed the nature of household chores. Its stores helped lead to the suburbanization of postwar America, anchoring malls that helped new communities to grow. During its reign, it was one of the biggest household names in the country. However, Sears wasn’t able to keep up with its competitors. It fell behind other retailers such as Walmart, which offered lower prices and a wider variety of goods, including groceries. In 1999, Home Depot, bested Sears. As the digital age approached and people have started shifting to online shopping, Sears fell further and further behind. The company cannot cope up with the fast-paced changes in the retail industries. The company has enough resources and has an edge to become a major player online. However, Sears did not grab this opportunity. Companies like Amazon became known and soon enough, earned its share in the market. Its new CEO, Eddie Lampert, thought he could turn around both companies just by reducing costs and selling estate properties where unprofitable stores were located. Upon merging in 2005, SHLD has around 3,500 stores. It is expected that only 1,000 stores will be left at the end of 2018. Another factor that may have contributed to the downfall of Sears is the failure of the company to invest its savings to rebuild the business. Sears, instead of adopting to the new demands, took a step backward and merged with another retailer Kmart, to form Sears Holdings (SHLD). Furthermore, the company let its physical stores fall into disrepair. Meanwhile, other retailers such as Macy’s invested heavily in its stores to improve customer in-store experiences.
Page 4 of 7
B. Toys R Us
One of the highest profile names on the bankruptcy list, Toys R Us, Inc., a specialty toy retailer, fell victim to the same fate as many big box stores in recent years. The retail industry has been shaken up due to the boom of e-Commerce industry. Toys R Us filed for bankruptcy in September 2017. As part of the liquidation of assets, it planned to auction off its intellectual property, including the company’s name, website, and its brand mascot.
The company was saddled with heavy debt acquired when Bain Capital and other firms took the company private in 2005. By the time the company was approaching bankruptcy in 2017, it still had about $5 billion in liabilities.
Page 5 of 7
Analysis
The case of Toys R Us is another example of companies failing to innovate. Due to the booming e-Commerce industry, most retailers made ways to shift to the online shopping. However, the company didn’t join the bandwagon, and instead, continued with its current operations. Thus, it gave an opportunity to its main competitors.
However, online shopping was not the main reason why Toys R Us failed. The company’s biggest problem was its billions of dollars in debt. Because of this debts, necessary investments in stores were instead paid to the creditors. The opportunity to improve the customer in-store experience have not been used due to the piling interest expenses of the Company.
Page 6 of 7
References: https://money.cnn.com/2018/02/12/news/companies/sears-downfall/index.html https://www.investopedia.com/news/downfall-of-sears/
Page 7 of 7
Case Study Presented to the Faculty of the College of Accountancy, Business, Economics And Hospitality Management Batangas State University Batangas City
In Partial Fulfilment of the Requirements For the Masteral Degree of Business Administration
By: Kristine Angelie R. Belgado
Batangas State University
TABLE OF CONTENTS
Sears Holding Corp. ..................................................................................... 3 Analysis ........................................................................................................ 4 Toys R Us Inc. .............................................................................................. 5 Analysis ........................................................................................................ 6 References ................................................................................................... 7
A. SEARS HOLDINGS CORP. Sears Holdings Corp. (SHLD) filed for bankruptcy on October 15. Various remedies, including store closures and deals were made in desperate attempts to stay afloat, have also failed. In a statement, the company announced that its CEO, Edward Lampert, has stepped down and day-to-day operations will be managed by three high-ranking executives. Lampert will remain chairman of the board. The firm will remain the chairman of the board. The firm began the restructuring process after it failed to pay back $134 million that was due on October 15. The company also said it will begin closing an additional 142 unprofitable stores near the end of the year. It previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018. The Sears and Kmart chains have 894 US locations left, compared to a total of 3,500 between them when they merged in 2005. The bad news coming out of Sears has been steady to the point of being tedious. The company hasn’t just been shedding locations: In 2017, Sears stopped selling Whirlpool appliances, which it had carried since 1916. An internal company memo reportedly cited pricing conflicts. In August, Lampert offered to buy the Kenmore appliance brand for $400 million in cash through his hedge fund ESL Investments after the company failed to find other takers. ESL also offered to buy the Home Improvements business for $80 million in cash. “Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” said Lampert in the statement announcing the bankruptcy petition. “While we have made progress, the plan has yet to deliver the results we have desired, and addressing the Company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer. The Chapter 11 process will give Holdings the flexibility to strengthen its balance sheet, enabling the Company to accelerate its strategic transformation, continue right sizing its operating model, and return to profitability.” Page 3 of 7
Analysis Sears is a well-known American retailer. When it was first launched in 1888, most people made their own clothes and even their own furniture. Sears introduced mass-produced items instead. New appliances, such as washing machines changed the nature of household chores. Its stores helped lead to the suburbanization of postwar America, anchoring malls that helped new communities to grow. During its reign, it was one of the biggest household names in the country. However, Sears wasn’t able to keep up with its competitors. It fell behind other retailers such as Walmart, which offered lower prices and a wider variety of goods, including groceries. In 1999, Home Depot, bested Sears. As the digital age approached and people have started shifting to online shopping, Sears fell further and further behind. The company cannot cope up with the fast-paced changes in the retail industries. The company has enough resources and has an edge to become a major player online. However, Sears did not grab this opportunity. Companies like Amazon became known and soon enough, earned its share in the market. Its new CEO, Eddie Lampert, thought he could turn around both companies just by reducing costs and selling estate properties where unprofitable stores were located. Upon merging in 2005, SHLD has around 3,500 stores. It is expected that only 1,000 stores will be left at the end of 2018. Another factor that may have contributed to the downfall of Sears is the failure of the company to invest its savings to rebuild the business. Sears, instead of adopting to the new demands, took a step backward and merged with another retailer Kmart, to form Sears Holdings (SHLD). Furthermore, the company let its physical stores fall into disrepair. Meanwhile, other retailers such as Macy’s invested heavily in its stores to improve customer in-store experiences.
Page 4 of 7
B. Toys R Us
One of the highest profile names on the bankruptcy list, Toys R Us, Inc., a specialty toy retailer, fell victim to the same fate as many big box stores in recent years. The retail industry has been shaken up due to the boom of e-Commerce industry. Toys R Us filed for bankruptcy in September 2017. As part of the liquidation of assets, it planned to auction off its intellectual property, including the company’s name, website, and its brand mascot.
The company was saddled with heavy debt acquired when Bain Capital and other firms took the company private in 2005. By the time the company was approaching bankruptcy in 2017, it still had about $5 billion in liabilities.
Page 5 of 7
Analysis
The case of Toys R Us is another example of companies failing to innovate. Due to the booming e-Commerce industry, most retailers made ways to shift to the online shopping. However, the company didn’t join the bandwagon, and instead, continued with its current operations. Thus, it gave an opportunity to its main competitors.
However, online shopping was not the main reason why Toys R Us failed. The company’s biggest problem was its billions of dollars in debt. Because of this debts, necessary investments in stores were instead paid to the creditors. The opportunity to improve the customer in-store experience have not been used due to the piling interest expenses of the Company.
Page 6 of 7
References: https://money.cnn.com/2018/02/12/news/companies/sears-downfall/index.html https://www.investopedia.com/news/downfall-of-sears/
Page 7 of 7
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