The Everest Newsletter: Commercial, December ’18 Edition

 

Just the Peaks

This newsletter, at a glance

  • Sears Holdings will sell 500 locations as part of their bankruptcy proceedings
  • Financial experts hope it can pull a turnaround to save this American institution
  • Everest breaks down the company’s plan to leverage real estate to stay afloat

Sears announces plan to offload 500 properties as part of Chapter 11 filing
Hang on to your holiday spirit as we examine what they’re doing right


For decades, Sears, Roebuck and Company shaped and reshaped shopping trends as America’s definitive retail juggernaut. Synonymous with the holiday season, the store brought consumers Craftsman tools, Kenmore appliances, as well as the beloved “Sears Wishbook,” an extension of their innovative mail-order catalog dating back to 1886.

Fast forward to November 2018, and market forces have pushed Sears outside its comfort zone. But among other smart moves, Sears merged with Kmart when shareholder Edward Lampert took over as CEO back in 2005. While the move wasn’t enough to compete with giants like Wal-Mart, Target, Kohl’s and Amazon, the merger marked one of the company’s many strategic zigs under pressure.

 

Evolution—or the end of an era?

Since recent news broke in the long-running Sears saga, experts have been scrutinizing Lampert’s two-phased mission: auction off 142 of their stores by the end of the year, then sell the more successful locations sprinkled across the country. Among them are four in New York City, including the multilevel West 34th Street, steps from Penn Station.

Sears may be the latest victim of globalization, but industry figures believe smart management will help it avoid the failures of stores like Circuit City and Toys “R” Us, whose bankruptcy blunders resulted in total liquidation. “Over the past several years, we have worked hard to transform our business and unlock the value of our assets,” says Lampert.

And while the company works on maximizing its real estate portfolio, spokespeople assured the public that existing stores will remain open through the holiday season.

 

Saying goodbye to Sears
History by the numbers

  • The company’s revenue dropped for 11 straight years (-$11B) with a loss of $508 million and 4% sales down in the latest report
  • Back in 2015, Sears sold an initial 235 stores in an effort to bolster sales; today, 866 Sears and Kmart stores remain
  • Per the proposal, sales will help reduce Sears’ debt, with Lampert’s ESL Investments receiving the bulk of the $1.5B proceeds
                          *Stats reported by Forbes and The Chicago Tribune, Oct-Nov 2018

 

The road to restructuring

Lampert’s team of strategists remains optimistic. Currently ranked 27th in the United States’ ecommerce market, Sears still managed 30 million visits to their website last year. Its real estate sales could also help the company refocus ecommerce efforts.

Sears is no stranger to successful pivoting. Back in the early days of Lampert’s takeover, Sears was actually one of the first stores to launch an online app. This earned them the coveted title of ‘Mobile Retailer of the Year’ in 2011.

As both finance professionals and consumers with warm memories of the Sears years past, we are hopeful that some quick real estate sales, savvy marketing, and investment in upgrades for their remaining stores will help Sears survive beyond the 2018 holiday season. Maybe they will even flourish and show us just what money smarts they’ve got under their belt.

 

Everest says: The future is the brightest time yet
See you in 2019 for more CRE stories