“The solution to Sears’ problems was to buy another retailer not doing well , and that was Kmart. Then they got a bigger bad business,” Neil Saunders, managing director of Global. Data Retail, told CNBC.
You might be asking “What went wrong with the Sears-Kmart merger?”
Trying to seamlessly integrate two different cultures, different systems and processes is hard for even the strongest of companies. But for a company that had already moved in too many directions, the merger took a heavy toll on Sears. “The solution to Sears’ problems was to buy another retailer not doing well, and that was Kmart.
Why did Sears merge with Kmart?
Before Lampert bought Sears in 2004, he purchased discount retailer Kmart out of bankruptcy. He then took two already weak retailers and merged them in 2005. The hedge fund owner saw value in the retailers’ real estate and believed that combining two fading giants would make them stronger.
But for a company that had already moved in too many directions, the merger took a heavy toll on Sears. “ The solution to Sears’ problems was to buy another retailer not doing well , and that was Kmart. Then they got a bigger bad business,” said Neil Saunders, Managing Director of Global, and data retail.
Another frequent question is “How did Amazon’s sales compare to Sears after the Kmart merger?”.
Well, its total sales were a mere 17% of Sears’ in 2005, the first full year after the Kmart merger. But whereas Sears’ revenues fell by 14% over the following five years, Amazon’s nearly quadrupled .
Why did sears holdings fail?
Sears failed because apparently no one in the executive suite or at the board level had the right ideas about the new retail environment; that means for some time, Sears was led by the wrong individuals.
Fast forward less than two decades later to 2018 when Sears was in so much financial hardship with declining sales and profits as well as mounting debt it filed for bankruptcy. Hedge fund manager Edward Lampert, who already was Sears’ largest shareholder, purchased the company in bankruptcy proceedings for only $5.2 billion.
The department store chain, led by hedge fund manager and CEO Eddie Lampert, has steadily been shrinking its assets over the years as its lost sales to Walmart, Target, Home Depot, Amazon and other competitors for its signature appliances and “Softer Side of Sears” apparel. CNBC looks at five things that caused Sears to fail in recent years.
A few decades later when Sears merged with Kmart in 2005 the combined organization generated a substantial $55 billion in revenue. Fast forward less than two decades later to 2018 when Sears was in so much financial hardship with declining sales and profits as well as mounting debt it filed for bankruptcy.
You should be wondering “How many stores did Sears have when it went bankrupt?”
Sears Holdings filed for Chapter 11 bankruptcy on Oct. 15, 2018, at which time it had 700 stores across the U. S, $6.9 billion in assets and $11.3 billion in liabilities.
The company announced in a statement that CEO, Edward Lampert, would step down, with day-to-day operations managed by three high-ranking executives. Lampert remained chairman of the board. 1 The firm began to restructure after it failed to pay back $134 million that was due on Oct. 15.
How many Sears and Kmarts have been shut down?
That’s on top of the 2600 Sears and Kmarts already sold or shuttered over the past decade. Cohen, who is teaching the MBA classes “Creation of a Retail Enterprise” this fall and “Retail Fundamentals” in the spring, describes Sears as a case study in management failure with lessons for MBAs and business leaders.
How much did Kmart spend on capex before and after the merger?
Interestingly, prior to Kmart’s bankruptcy in 2002, Kmart had 2001 Capex of $1.385 billion and Sears had Capex of $1.126 billion, or $2.511 billion between the two of them. Post-merger, that number had dropped to $513 million, one-fifth of the 2001 amount.