The slow-motion downsizing of Sears Holdings Corp. entered the long-expected Chapter 11 bankruptcy protection stage Monday with plans to close at least 142 more stores by year’s end.
The Triad Sears and Kmart stores have made it through the initial cut and aren’t expected to close this year, according to a posting of closings by USA Today.
Sears said the stores being closed are “unprofitable” with liquidation sales “expected to begin shortly.”
Before the bankruptcy filing, Sears had three Triad stores — Hanes Mall in Winston-Salem, Friendly Shopping Center in Greensboro and Holly Hill Mall and Business Center in Burlington — and one Kmart store in Clemmons.
The closings announced Monday are in addition to the previously announced closing of 46 unprofitable stores expected to be completed by November.
Sears previously owned the Hanes Mall and Friendly Center properties, which could play a key role in deciding whether to keep them open.
However, a real-estate arm of Novant Health Inc. spent $14.5 million Thursday to buy the 175,000-square-foot property at the mall, the outparcel automotive building and the parking lots — altogether 16.72 acres.
“Novant Health purchased the property as part of our long-term growth strategy” for its Winston-Salem market, Dr. Stephen Motew, president of Novant’s greater Winston-Salem Market, said in a statement. “The building will continue to be leased by Sears until 2020.”
“Malls are struggling in general, but Hanes Mall less so than most others — due to size being one of the largest enclosed malls between Washington DC and Texas at about 1.8 million square feet,” said Raymond Collins with Collins Commercial Properties Inc.
“It is performing reasonably well due to immediate lack of competing mall competition due to its size, allowing it to serve a broad regional area, particularly westward, without head-on enclosed mall competition, only inline, free-standing, or open air center competition.”
The (Sears) declaration of bankruptcy by what was once America’s largest retailer “is the irony of ironies,” said Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University School of Business.
“The company that once began as a remote-order and direct-delivery business has now all but lost the battle for survival to a retail environment that is, once again, becoming remote-order and direct-delivery.
“In retail, losing your vision for the future now means losing your place in the present,” Beahm said. “And that’s what has happened to Sears.”
Altogether, there are 13 Sears and nine Kmart stores remaining in North Carolina. Listed for closing are Sears stores in Fayetteville, Goldsboro and Pineville and Kmart stores in Asheville, Raleigh and Statesville.
There are 687 Sears and Kmart stores nationwide with about 68,000 employees. That’s down from about 1,000 stores and about 88,000 combined employees as recently as February.
The Sears mall stores serve as pivotal anchor tenants, both in terms of space and customer traffic.
Hanes Mall expects to generate a new wave of customer traffic near Sears in the spring when Dave & Buster’s opens a 31,576-square-foot site on the lower level near the carousel. The popular chain mixes arcade-style games with a restaurant and sports bar.
John Sweeney, a UNC Chapel Hill marketing professor, said the Sears bankruptcy felt inevitable.
“I remember being in Sears and thinking it was behind the times ... in 1985,” Sweeney said. “The amazing thing is how long it held on.”
Beahm said the decision was not surprising given it had been forecast for months, if not more than a year.
“Regularly closing more and more stores to cut losses without a vision for how to pull out of the dive spells the ultimate ending for even the most glorious of brands,” Beahm said.
“When you are a particularly large retailer, and Sears was once the largest, you must either drive the future or become the past. If you’re somewhere in the middle, you won’t stay there for long, especially not in today’s environment.”
Sears, like Toys R Us with its bankruptcy filing earlier this year, said it plans to streamline its operations through the bankruptcy process with hopes of staying in business.
“The company expects to move through the restructuring process as expeditiously as possible and is committed to pursuing a plan of reorganization in the very near term as it continues negotiations with major stakeholders started prior to today’s announcement,” the company said in a statement.
Sears has received commitments for up to $300 million in senior debtor-in-possession from its asset-based revolving lenders. It is negotiating for another $300 million subordinated debtor-in-possession financing with ESL Investments Inc. — the company’s largest stockholder and creditor.
ESL is supporting an effort to secure a “stalking-horse” bidder “for the purchase of a large portion of the company’s store base.”
In bankruptcy filings, stalking horse is the term used to describe a bidder that sets a minimum price for the assets. Companies hope that other bidders will then emerge with higher offers.
Edward Lampert, Sears’ chairman and chief executive, has those same roles with ESL. Lampert is stepping down as chief executive as part of the bankruptcy process.
The company said it intends to continue paying employee wages and benefits, honor member programs, and pay vendors and suppliers for all goods and services provided on or after the filing date.
“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” Lampert said.
“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 (Sears) Holdings the flexibility to strengthen its balance sheet, enabling the company to accelerate its strategic transformation, continue rightsizing its operating model and return to profitability.”
Sears cautioned that “there can be no assurance that any transaction will be consummated or on what terms any transaction may occur. Additionally, (Sears) Holdings expects to market and sell certain of the company’s assets over the coming months.”
Christian Stadler, a business professor at Warwick Business School, said Sears’ most pivotal problem was “that it stopped adapting to fit its changing environment” since the 1980s when Walmart became a national disruptive retail force.
“The retail industry has been through a series of disruptive changes. Amazon in particular has pulled shoppers online, away from the mall.
Stadler said Sears spun its wheels trying to pull off what he called “financial engineering, launching lots of spin-offs.”
“It is difficult to see a way back for Sears. The obvious move would be to create a stronger online presence, but that is difficult because its brand is not a particular draw.
“I expect it to follow other once-iconic brands like Toys ‘R’ Us and close up shop altogether.”
Neil Saunders, managing Director of GlobalData Retail, was more optimistic about Sears’ chances of surviving bankruptcy protection.
“As much as today is a conclusion of sorts, it is not the end of the story,” Saunders said.
“Trading through the holidays is a reasonable tactic, not least because it will allow Sears to clear down some inventory and ensure that at least some staff can keep their jobs, even if only temporarily.
“Even so, Sears will still be running up a down escalator,” Saunders said. “This is all the more so as many consumers will now be nervous about buying bigger ticket items from the retailer for fear that it may not be around to back guarantees or fix problems come the new year.”
Saunders said that Sears’ decision not to liquidate right away “is probably the best outcome” for the retail industry as a whole.
“A full liquidation over the holiday period would have created a lot of price pressure in the market and would likely have diverted some spending from other stores,” Saunders said. “A partial closure of shops is far less damaging.”