Monday, January 14, 2019

The other Sears is not bankrupt


Sears Hometown and outlet stores were spun off in 2012 by the now bankrupt Sears Holdings. The hope was that the $ 447-million deal would shield the specialty chain from the problems of Sears, while the parent company received an infusion of money.
It did not work that way. Sears Hometown and Outlet (SHOS) shares have fallen by nearly 30% since the bankruptcy of Sears and more than 90% since their IPO in 2012. In December, Sears Hometown announced it would close 80-100 of its 750 stores and liquidate its inventory to reduce its debt.

This was a shock to some owners of Sears Hometown, most of which are independent franchise companies.

"I thought we would have a better day when Sears went bankrupt, as we were told," said one owner of an Alabama store to CNN Business. "We learned differently the next day after the bankruptcy, when we wondered why we did not get the expected delivery, we probably had no inventory for 10 weeks."

The average store of Sears Hometown is only 8,000 to 10,000 square feet, a fraction of the size of the average full Sears, which is about 160,000 square feet. Sears Hometown sells tools as well as outdoor products and equipment.

Sears Hometown has never stopped being dependent on Sears Holdings. Most of its goods, logistics and advertising support came from Sears Holdings. Eddie Lampert, CEO and Chairman of Sears until his bankruptcy, remains majority shareholder of Sears Hometown.

The owners of the hometown franchise earn their money with commissions on their sales. And franchise owners have invested in their stores with the promise of making healthy commissions. The two owners, who spoke to CNN Business, said that in some cases, the investments exceeded $ 100,000 per store.

"Sears employees are losing their jobs and we are losing our lives," said a former owner of three West Coast businesses. "You stay on the job when it comes to leases, other bills - utilities, payroll, taxes - Sears Hometown has the inventory, you only have liabilities."

The owner of the Alabama store said he has lost $ 93,000 since the beginning of October. He said he worked in three jobs, more than 100 hours a week, to pay his own bills and keep his employees at work. He plans to close his shop later this month and hopes to reopen it as an independent appliance store.

If Sears Holdings survives bankruptcy, there will only be 223 Sears brand stores. In many parts of the country, Sears Hometown's stores would be the only reminder of the once dominant retailer.
Will Powell, CEO of Sears Hometown, declined to comment on his plans to keep the company open. Sears Holdings may be forced to liquidate by its creditors next month.

In its December earnings report, Sears Hometown stated that the company, despite Sears Holdings Bankruptcy. It did not matter what it or its owners would do if Sears was pushed out of business.

Many doubt that Sears Hometown can survive a Sears liquidation.

"Theoretically, they could try to sell other brands, but the business model would be much more difficult," said Mark Cohen the Director of Retail Studies at Columbia Business School and a former CEO of Sears Canada. "You are not insolvent, but if Sears goes into liquidation, this business is likely to be next."

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