Sears Holdings

Sears Holdings Corporation
Company type	Holding company
Industry	Retail
Founded	March 24, 2005; 21 years ago
Defunct	2019
Fate	Filed for Chapter 11 bankruptcy; assets sold to ESL Investments; holdings transferred to Transformco
Headquarters	Hoffman Estates, Illinois, United States
Area served	United States
Key people	Eddie Lampert (Chairman, former CEO)
Products	Retail chains (Sears, Kmart)
Parent	ESL Investments (after 2019)

Sears Holdings Corporation was a U.S.-based holding company with its headquarters located in Hoffman Estates, Illinois. It functioned as the parent organization for the retail chains Kmart and Sears, established following Kmart's acquisition of Sears in 2005. By the year 2015, it ranked as the 20th-largest retailer in the United States. The corporation filed for Chapter 11 bankruptcy protection on October 15, 2018, subsequently selling its assets to ESL Investments in 2019. These holdings were then transferred to a newly formed subsidiary named Transformco.

2004–2005: Establishment

On November 17, 2004, executives at Kmart Holding Corporation revealed plans to acquire Sears, Roebuck and Co., resulting in the creation of Sears Holdings Corporation. Kmart had emerged from Chapter 11 bankruptcy protection in May 2003. The merger was finalized on March 24, 2005, consolidating Sears and Kmart as subsidiaries under the umbrella of Sears Holdings, which managed both brands and continued promoting their exclusive product lines.

Primary objectives behind the merger included:

Rapid expansion of Sears' larger off-mall retail stores branded as Sears Grand, utilizing former Super Kmart locations.
Improved access to proprietary brands through combined real estate assets, aiming for an estimated annual revenue boost of $200 million.
Achieving $300 million in yearly cost reductions by optimizing supply chain operations and decreasing administrative expenses.
Fostering a cohesive customer-centric corporate culture to enhance revenue per square foot.
Preserving both brand identities to cater to distinct customer segments without causing brand dilution.

The corporate governance structure featured a board comprising seven directors from Kmart and three from Sears. Shareholders of Kmart received one share in Sears Holdings each, while Sears shareholders exchanged their stock for a mix of 55% equity and 45% cash at $50 per share. The merger received approval from regulatory bodies and shareholders before completion.

2005–2009

Under Sears Holdings, stores operated under both the Sears and Kmart banners, introducing the Sears Essentials format in 2005. This concept merged elements of Sears and Kmart to better compete with Walmart and Target by converting select Kmart locations as well as stores acquired from Walmart and bankrupt competitors. This format eventually integrated with Sears Grand.

The company engaged in cross-brand merchandising by offering Craftsman tools within Kmart locations while discontinuing Martha Stewart paint products at Sears stores.

Sears Holdings possessed a controlling interest of 51% in Sears Canada, a significant department store chain that it once owned up to 92% of. A full takeover attempt failed in 2006 due to Bill Ackman’s 17.3% stake; he divested his shares by 2010. Additionally, Sears held a 20% ownership stake in Sears Mexico, where Carlos Slim maintained an 80% share. In Australia and New Zealand, Kmart stores were owned by Wesfarmers following its acquisition of Coles Group in 2007.

In 2005, Sears divested part ownership of Orchard Supply Hardware to private equity firm Ares Management and completed spinning off its remaining shares by late 2011.

During 2006, rumors circulated about potential acquisitions by Sears including Safeway, Home Depot, Gap, BJ's Wholesale Club, Radio Shack, Pep Boys, and Anheuser-Busch. By 2007, analysts described Sears as operating similarly to a hedge fund by channeling funds from retail operations into financial investments that initially contributed significantly to pre-tax profits but declined later that year.

In 2007, Sears transferred ownership of its Kenmore, Craftsman, and DieHard brands into a bankruptcy-remote entity named KCD IP. This subsidiary issued $1.8 billion worth of bonds sold to Sears’ Bermuda-based insurance affiliate. In return, Sears paid licensing fees for use of these trademarks.

Late in 2007, Sears pursued acquisition of Restoration Hardware after acquiring a 13.7% stake but retracted its $6.75-per-share bid following a drop in Restoration Hardware’s stock price and competing offers; it later proposed $4.55 per share in early 2008.

In June 2008, the company launched Servicelive.com to connect consumers with local contractors for home improvement services, charging a commission fee of 10% per contract. By 2010, the platform was revamped with Dennis Stemmle appointed as president of this division.

2010–2014

On February 22, 2010, Sears Automotive introduced an Independent Sears Auto Center franchise initiative, enabling car dealerships to operate licensed Sears Auto Centers, beginning with a location in New Jersey. Following the 2005 merger between Sears, Roebuck and Co. and Kmart Corp, the company faced a steady decline in financial performance, with net income plummeting by 84 percent from $858 million in 2005 to substantially lower figures by 2011. During this downturn, Eddie Lampert held the position of chairman. In the first quarter of 2011, Sears reported a net loss amounting to $170 million, equivalent to $1.58 per share. Analysts linked the persistent difficulties to Lampert’s cost-reduction approach, which prioritized stock repurchases and online expansion over investment in physical stores.

From 2011 through 2013, Sears Holdings shuttered numerous outlets due to poor sales results. On December 27, 2011, the company announced intentions to close between 100 and 120 Sears and Kmart locations. Subsequently, on February 23, 2012, Sears Holdings declared the shutdown of all nine "The Great Indoors" stores. Later, on December 6, 2013, the company unveiled plans to spin off its Lands' End catalog division into an independent publicly traded company by distributing shares to existing shareholders. Lands' End commenced trading on the NASDAQ stock exchange on April 7, 2014.

2015–2017

In 2015, Sears Holdings aimed to transfer ownership of 235 properties into a newly established real estate investment trust (REIT) named Seritage Growth Properties. This transaction was supported by a $925 million loan from JP Morgan Chase Bank. The portfolio primarily consisted of Sears and Kmart store locations throughout the United States and Puerto Rico, encompassing a total of 37.1 million square feet. Utilizing retail real estate conversions into REITs was a prevalent strategy within the commercial property market.

Nevertheless, the Seritage transaction drew criticism for allegedly undervaluing assets and presenting conflicts of interest linked to company founder and CEO Edward Lampert. These concerns led to investor lawsuits that were ultimately resolved with a $40 million settlement.

In May 2016, Sears pursued strategic options to enhance revenue generated from its proprietary brands by broadening their availability beyond traditional Sears and Kmart outlets, including through standalone appliance retail locations.

Between late 2016 and early 2017, Lampert—whose personal fortune was estimated at approximately $2 billion and who founded hedge fund ESL Investments Inc.—provided an additional $500 million loan to Sears and committed letters of credit potentially totaling up to $700 million. Amid these efforts, the company announced plans to close 150 stores following a holiday sales drop of 12-13% and reported its largest quarterly loss since 2013. In January 2017, Sears agreed to sell its Craftsman brand to Stanley Black & Decker for $900 million plus royalties payable over fifteen years while retaining royalty-free licensed sales during this timeframe.

To expand brand presence, Sears initiated a pilot DieHard Auto Center franchise in San Antonio as an independent auto service operation after closing nearby Sears locations. By late 2017, Sears discontinued national television advertising campaigns for both Kmart and Sears brands, shifting marketing efforts predominantly toward digital channels.

On January 4, 2018, Sears Holdings announced plans to close 103 underperforming Kmart and Sears stores by April, reducing its total store count to 555 after experiencing sales declines for twenty-four consecutive quarters. Industry analysts speculated that the brand could vanish within that year. Shortly thereafter, on January 14, 2018, Sears Canada ceased all operations.

During the fourth quarter of 2017, Sears reported a modest profit largely attributed to tax refunds despite continuing decreases in sales. By September 2018, after missing earnings report deadlines, the company disclosed a $508 million loss accompanied by slight improvements in same-store sales. Lampert cited challenges related to pension payments and associated regulatory fines as primary causes for these losses.

By late September 2018, shares of Sears Holdings dropped below $1 per share amid escalating financial difficulties, placing the company at risk of being delisted from NASDAQ.

2018 bankruptcy

On October 10, 2018, Sears Holdings retained advisors in preparation for an impending bankruptcy submission. The company officially filed for Chapter 11 bankruptcy protection on October 15, 2018, coinciding with a $134 million debt obligation due on that date, and simultaneously announced the shutdown of 142 stores—comprising 63 Kmart and 79 Sears outlets.

The remaining Sears and Kmart locations continued operating alongside their e-commerce sites (sears.com, kmart.com, shopyourway.com) to serve customers affected by the closures. On the day of the filing, CEO Eddie Lampert resigned from his executive role but stayed on as chairman; CFO Robert A. Riecker, CDO Leena Munjal, and apparel division president Greg Ladley took over CEO duties.

Following the bankruptcy declaration, Sears Holdings' share price dropped below $1 per share and was removed from NASDAQ on October 24, 2018, subsequently trading on the OTC Pink market. On November 8, the company revealed plans to shutter an additional 40 stores. By November 23, Sears had placed 505 stores—239 Kmarts and 266 Sears locations—up for sale during bankruptcy proceedings while others conducted liquidation sales.

On December 28, 2018, Sears announced intentions to close another 80 stores amid potential liquidation scenarios. Lampert submitted a last-minute bid valued at $4.6 billion aiming to preserve approximately 425 stores and maintain employment for around 50,000 workers.

On January 16, 2019, Lampert's hedge fund ESL Investments emerged as the winning bidder in the bankruptcy auction, enabling Sears to continue operations. Nonetheless, unsecured creditors—including Simon Property Group—filed legal challenges against the agreement, accusing Lampert of asset stripping that harmed suppliers and landlords and seeking to compel liquidation.

The Pension Benefit Guaranty Corporation opposed the deal due to a $1.7 billion pension shortfall that could impose costs on taxpayers and expressed concerns over Lampert’s acquisition of key brands such as Kenmore and DieHard.

A bankruptcy judge approved Lampert’s $5.2 billion restructuring plan on February 7, 2019, allowing the business to persist with roughly 425 stores and preserving about 45,000 jobs. This reorganization resulted in the creation of Transform Holdco LLC.

In May 2019, Sears introduced smaller-format outlets under the Sears Home&Life brand focusing on appliances, mattresses, and connected home products in select locations including Overland Park (Kansas), Anchorage (Alaska), and Lafayette (Louisiana).

By June 2019, Sears Holdings intended to fully dissolve following the sale of retail assets to ESL Investments. In March 2019, Sears Holdings filed a lawsuit against Transform Holdco seeking $57.5 million owed from asset sales and related transactions; this suit was resolved in January 2020.

Sears Holdings officially exited bankruptcy on October 29, 2022.

Finances

Year	Revenue in mil. US$	Net income in mil. US$	Total assets in mil. US$	Employees	Stores
2006	49,455	857	30,467	355,000	3,843
2007	53,016	1,492	29,906	352,000	3,791
2008	49,867	812	27,497	337,000	3,791
2009	46,007	295	25,444	324,000	3,862
2010	43,360	218	24,901	322,000	3,862
2011	42,664	122	24,360	312,000	3,949
2012	41,567
21,381	293,000	4,010
2013	39,854
19,340	274,000	2,548
2014	36,188
18,261	249,000	2,429
2015	31,198
13,209	196,000	1,725
2016	25,146
11,337	178,000	1,672
2017	22,138
9,362	140,000	1,430
2018	16,702
7,262	89,000	1,002

Former subsidiaries

Kmart division
- Kmart – discount retail outlets, typically standalone or located in strip shopping centers, offering a mix of department store goods and limited grocery selections.
- Big Kmart – a hypermarket-style branch featuring a broader product assortment; numerous locations were rebranded as Kmart following the merger.
- K-Fresh – grocery-centric sections integrated within select Super Kmart stores.
- mygofer – an e-commerce hybrid introduced in 2009, allowing customers to place orders online for pickup or delivery.

Sears division
- Sears – department stores primarily situated in malls, providing merchandise geared toward middle-income consumers along with appliances and tools.
- Sears Grand – large-format hypermarket-style stores, often converted from existing Kmart or Sears sites, offering an expanded inventory.
- Sears Home Services – provider of appliance repairs and home-related services including HVAC maintenance and lawn care.
- Sears PartsDirect – retail outlets specializing in parts for lawn and garden equipment; several locations also offer repair services.
- Sears Vacations – an online travel service operated in partnership with International Cruise & Excursions.
- Sears Canada – held a 10% ownership stake between 2014 and 2018.

Other subsidiaries
- DieHard Auto Center – independent automotive service centers established in 2017 focusing on DieHard brand products.
- Shop Your Way – a customer rewards program utilized across various subsidiaries.
- A&E Factory Service – a collaborative venture with Whirlpool providing mobile appliance repair services.
- Wally Labs – a provider of home security and safety technology acquired in 2015.
- Monark Premium Appliances – upscale appliance showrooms catering to architects and property developers.
- Innovel Solutions – logistics division supporting Sears Holdings and external clients with last-mile delivery and installation.

Sears Hometown and Outlet Stores – specialty department stores spun off into an independent company in 2012.
- Sears Hometown – smaller standalone stores focusing on hardware and appliances in less populous areas.
- Sears Outlet – discount outlets selling both new and discontinued products.
- Sears Appliance & Hardware / Appliance Outlet – free-standing locations specializing in hardware and appliances.
- Sears Home Appliance Showrooms – dedicated to appliances and related services.
- Sears Fashion Outlet – outlet stores exclusively offering fashion merchandise.

Lands' End – business-casual apparel retailed both within Sears stores as shop-in-shop locations and through standalone outlets.

Defunct subsidiaries
- Kmart Super Center – the predecessor format to Big Kmart; final closure occurred in 2018.
- Sears Essentials – the forerunner to Sears Grand; operations ceased by 2012.
- Sears Optical – eyewear retail chain shuttered in 2020.
- Orchard Supply Hardware – California-based hardware chain owned from 1996 to 2012; ceased operations in 2018 following acquisition by Lowe's.
- The Great Indoors – upscale home décor retail stores closed permanently in 2012.

Additional resources

Katz, Donald R. (1987) The Big Store – Inside the Crisis and Revolution at Sears Viking Press (New York City)
Martinez, Arthur C. (2001) The Hard Road to the Softer Side: Lessons from the Transformation of Sears Crown Business (New York City)
Stevenson, Katherin Cole, and Jandl, H. Ward (1995) Houses By Mail: A Guide to Houses from Sears, Roebuck and Company John Wiley & Sons; Hoboken, New Jersey
Turner, Marcia L. (2003) Kmart's Ten Deadly Sins – How Incompetence Tainted an American Icon John Wiley & Sons; Hoboken, New Jersey

External links