Sears Employees: Get Your Resumes Ready — Your Troubles Are Far From Over
This week, Sears Holdings Corporation (SHLDQ) was “saved.” ESL Investments Inc. said it would pony up $5.2 billion for Sears, allowing the company to keep open some 400 stores and preserve roughly 45,000 jobs.
I have some advice for these 45,000 employees: Find new jobs now!
Why? Because ESL is run by Sears Chairman Eddie Lampert. The same chairman that presided over the company’s decimation. At its peak in 2012, Sears had more than 250,000 employees and roughly 4,000 locations.
With Lampert at the helm, Sears laid off thousands of workers, sold off properties and became a shell of its former self. And now, once the $5.2 billion bid is approved by the courts, ESL will maintain Lampert as Chairman — and now owner — of Sears Holdings.
“Since he bought control of Sears in 2005, Lampert has repeatedly stripped Sears of its assets and sold them off piece by piece to corporations he controls or has major stakes in,” Organization United for Respect (OUR) — a group that advocates for change at low-wage corporations — said in a statement. “While these decisions have made Lampert more than a billion dollars, he has destroyed more than 250,000 jobs in the process, leaving employees and their families without financial support.”
However, according to ESL, not only will the deal save tens of thousands of jobs, “It will also fund certain severance costs incurred by Sears during bankruptcy and reinstate severance benefits for eligible employees in a new company. In addition, it will honor commitments to loyal customers who purchased products with extended warranties and support affected vendors, who will retain a valuable source of revenue.”
Unfortunately for ESL, it’s not going to be that simple. Not only is Sears facing internal debt and liabilities issues, it’s doing so in the midst of a collapse of the retail sector as a whole.
Just this past week, a slew of major retailers offered up data on holiday sales.
From struggling J.C. Penney to retail juggernauts like Macy’s, Kohl’s and Nordstrom, the entire retail sector struggled this holiday season. Because of this, many retailers are now left with excess stock, meaning lower prices, lower margins and less revenue going forward. It’s so bad that the “retail Armageddon” theme is being resurrected across Wall Street.
Last year, department stores cut their square footage by 13 percent. Many analysts expect further shrinkage in 2019. Case in point, J.C. Penney is evaluating its real estate situation and weighing store closures. Meanwhile, Kohl’s and Macy’s are looking at ways to make use of excess floor space in existing stores.
Finally, retail stocks are down across the board. The SPDR S&P Retail ETF (XRT), and exchange-traded fund (ETF) that tracks the retail sector, is down massively from its August peak. While the sector has rebounded from December’s lows, investors are refusing to push XRT shares back above their 50-day trendline. This is a bearish sign for the retail sector, as it underscores a lack of investor confidence.
This is the backdrop for the retail sector, and I think we can all see the writing on the wall. ESL and Lampert are dumping $5.2 billion into a struggling retailer in a struggling retail market. Unless Lampert has hired a retail genius to turn the company around, the best he can do is squeeze Sears for cash on its remaining intellectual property and real estate value. And that means more layoffs and more closed stores. That was Lampert’s plan before and, in all likelihood, that’ll be his plan going forward.
So, Sears employees, get your resumes ready and find a new job now.