Sears Finally Entered Bankruptcy. The Struggle to Save It Was a Noble One: New at Reason

Today’s Chapter 11 bankruptcy filing for Sears Holdings has generated a lot of discussion about why the century-old retailer has finally failed.

Edward Lampert took control of Kmart when it emerged from bankruptcy in 2003. When Kmart announced its acquisition of Sears in 2004, press coverage described Sears as “broken” and “mired in a retail slump.” It is now 2018. That’s 14 years (for Sears) or 15 years (for Kmart) of patience and determination and hard work and rigorous analysis trying to rebuild a business that started out with bankrupt Kmart.

What has happened during those 14 or 15 years? Since 2005, Sears Holdings contributed more than $4.5 billion to fund long-established pension plans supporting Sears retirees whose careers at the company predated Lampert’s arrival. That compares favorably to General Motors, which went bankrupt in 2009 after the financial crisis in part because of its obligations to retirees. Sears management also kept open a lot of stores for a long time, hoping they’d turn around along with the economy and the company’s transformation. That kept a lot of Sears and Kmart employees working. That was a long-term bet that didn’t work out. A short-term mindset would have immediately closed more stores.

It wasn’t out of altruism. If Sears Holdings had managed to succeed better, the beneficiaries wouldn’t have only been pensioners and employees, but also shareholders, including Lampert. But interests were basically aligned, contrary to portrayals of Lampert looting the company through “financial engineering.”

Lampert could have quit and cut his losses years ago. Some have seen his failure to do so as hubris.

But what it took was guts, writes Ira Stoll.

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