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Sears files for Chapter 11 amid plunging sales, massive debt

NEW YORK (AP) — Sears filed for Chapter 11 bankruptcy protection Monday, with plans to shutter 142 unprofitable stores in the hopes that it can stay in business.

The question now is whether a smaller version of the company that once towered over the American retail landscape can be viable. Sears, which started as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and incurred huge losses over the years.

At its peak, the operator of Sears and Kmart had 4,000 stores in 2012 but will now be left with a little more than 500.

"This is a company that in the 1950s stood like a colossus over the American retail landscape," said Craig Johnson, president of Customer Growth Partners, a retail consultancy. "Hopefully, a smaller new Sears will be healthier."

FILE – In this March 24, 2005, file photo Kenmore refrigerators are wheeled into the existing K-Mart in Nashua, N.H., to become a "Sears Essentials" store. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Jim Cole, File) (AP)

"That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure," said Neil Saunders, managing director of GlobalData Retail, in a note published Monday. "In our view, too much rot has set in at Sears to make it viable business."

Even President Donald Trump weighed in on Sears’ collapse, calling it "a shame."

FILE – In this July 16, 1969, file photo people watch the Apollo 11 Saturn V rocket launch on multiple TV’s at a Sears department store in White Plains, N.Y. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Ron Frehm, File) (AP)

"Sears, Roebuck, when I was growing up, was the big deal. And it’s very sad what happened, very, very sad," he said to reporters on Monday outside of the White House. But Trump added that many of the Sears’ sites will be put to "good use" and mean a lot of jobs.

The company has struggled with outdated stores and complaints about customer service even for its once crown jewels: major appliances like washers and dryers. That’s in contrast with chains like Walmart, Target, Best Buy and Macy’s, which have been enjoying stronger sales as they benefit from a robust economy and efforts to make the shopping experience more inviting by investing heavily in remodeling and de-cluttering their stores.

FILE – In an undated file photo, Ruth Parrington, librarian in the art department of the Chicago Public Library, studies early Sears Roebuck catalogs in the library’s collection in Chicago. The catalog Parrington is holding features women’s fashion from 1902. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. (AP Photo/File) (AP)

Sears Holdings will close 77 Sears stores and 65 Kmart stores near the end of the year and liquidation sales are expected to begin shortly. That’s in addition to the closure of 46 unprofitable stores that had already been announced.

Edward S. Lampert, the company’s largest shareholder, has stepped down as CEO but will remain chairman of the board. A new Office of the CEO will be responsible for managing day-to-day operations.

FILE- In this Aug. 26, 1948, file photo women’s hats are pictured in a 1907 Sears Roebuck catalog from the shelves of the Chicago Public Library, in Chicago. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Edward Kitch, File) (AP)

The company said Monday it has secured $300 million in financing from banks to keep the operations going through bankruptcy. It’s negotiating an additional $300 million loan from Lampert’s ESL Hedge fund.

The filing listed between $1 billion and $10 billion in assets while liabilities range between $10 billion to $50 billion. It listed the Pension Benefit Guarantee Corp., the federal agency that insures pensions, as Sears’ biggest unsecured creditor, but noted the amount it owed as "unknown," according to court documents.

FILE – In this March 22, 2017, file photo, a woman and child ride the escalator at a Sears store in St. Paul, Minn. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Jim Mone, File) (AP)

Sears joins a growing list of retailers that have filed for bankruptcy or liquidated in the last few years amid a fiercely competitive climate. Some, like Payless ShoeSource, successfully emerged from reorganization in bankruptcy court. But plenty of others like, Toys R Us and Bon-Ton Stores Inc., haven’t. Both retailers were forced to shutter their operations this year soon after Chapter 11 filings.

Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing mall landlords to its tens of thousands of workers. But unlike other retailers that have gone bankrupt, there are not a lot of spoils for rivals to pick up. The company, once a big seller of toys, now has a tiny 2 percent market share in that area, according to investment research firm Jefferies. And its market share in major appliances has shrunk to just under 10 percent from 41 percent in 2001, according to Johnson of Customer Growth Partners.

FILE- In this Nov. 17, 2004, file photo Kmart chairman Edward Lampert, left, and Sears CEO Alan Lacy listen during a news conference to announce the merger of Kmart and Sears in New York. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Gregory Bull, File) (AP)

Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., following earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands’ End.

FILE – This May 3, 1973, file photo shows the topping ceremonies taking place atop the Sears Tower to mark the building reaching 1,454 feet in Chicago, from the view of from a helicopter looking northeast. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo, File) (AP)

In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets, like Kenmore, through his hedge fund as a $134 million debt repayment came due on Monday. Lampert personally owns 31 percent of the company’s shares, while his hedge fund has an 18.5 percent stake, according to FactSet.

Sears’ stock has fallen from about $6 over the past year to below the minimum $1 level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around $141.

FILE – In this 1930s file photo, General Robert E. Wood, president of Sears, Roebuck & Co., and Julius Rosenwald, chairman of the board, posing for a photo next to an All State tire, outside of the Sears Distribution Center, in Atlanta. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. (Atlanta Journal-Constitution via AP, File) (AP)

The company, which once had 350,000 workers, has shrunk to 68,000 workers as of Monday’s court filing. It had fewer than 900 stores as of May.

In a March 2017 government filing, Sears said there was "substantial doubt" it would be able to keep its doors open — but insisted its turnaround efforts would mitigate that risk.

FILE – In this Aug. 23, 1961, file photo shopper Arlene Hardt, right, is shown drapery samples by clerk Lucille Jagusch at the Golf-Mill Sears Roebuck department store in Niles, Ill. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo, File) (AP)

Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with a loyalty program. But losses continued and the company struggled to get more people through the doors or to shop online.

Jennifer Roberts, 36, of Dayton, Ohio, was a long-time fan of Sears and has fond memories of shopping there for clothes as a child. But in recent years, she’s been disappointed by the lack of customer service and outdated stores.

FILE – This March 1, 1959, file photo shows a Sears building in downtown Houston. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (Houston Chronicle via AP, File) (AP)
FILE- In this Nov. 29, 2007, file photo a person shops at the Sears store in Berlin, Vt. Sears has filed for Chapter 11 bankruptcy protection Monday, Oct. 15, 2018, buckling under its massive debt load and staggering losses. The company once dominated the American landscape, but whether a smaller Sears can be viable remains in question. (AP Photo/Toby Talbot, File) (AP)
For well over a century Sears has dominated the american retailing industry. (AP)

"The problem in Sears’ case is that it is a poor retailer," Saunders wrote in an analyst note last week. "Put bluntly, it has failed on every facet of retailing from assortment to service to merchandise to basic shop keeping standards. Under benign conditions, this would be problematic enough but in today’s hyper-competitive retail environment it is a recipe for failure on a grand scale."

For decades, Sears was king of the American shopping landscape. Sears, Roebuck and Co.’s iconic catalog featured items from bicycles to sewing machines to houses, and could generate excitement throughout a household when it arrived. The company began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s. But the onset of discounters like Walmart created challenges for Sears that have only grown. Sears faced even more competition from online sellers and appliance retailers like Lowe’s and Home Depot.

For well over a century Sears has dominated the american retailing industry. (AP)

Store shelves have been left bare as many vendors have demanded more stringent payment terms, says Mark Cohen, a professor of retailing at Columbia University and a former Sears executive.

For well over a century Sears has dominated the american retailing industry. (AP)

John Germann, 46, works full-time and makes $14 per hour as the lead worker unloading merchandise from trucks at the Chicago Ridge, Illinois, store, which has been drastically reducing its staff since he started nine years ago. Germann now has only 11 people on his team, compared with about 30 a few years ago.

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