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The retail graveyard is full of companies like RadioShack and Gymboree that emerged from bankruptcy and then filed for a second time in relatively short order.
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The company spun off the Lands' End brand, which ESL now majority owns and has wound down its relationship with Sears.
About five years later, in , Sears Canada went bankrupt and liquidated. Sears also spun off hundreds of its choicest owned properties into a real estate investment vehicle, Seritage Growth Properties, in which ESL holds a substantial interest.
Over time, though, Seritage has leased out properties once rented by Sears to other retailers. As of the turn of the year, Seritage has no locations leased to Sears or Kmart.
Litigation and Lampert remain its only ties to the Sears name. Lampert also loaned Sears Holdings hundreds of millions of dollars on multiple occasions, and took in money from the company on interest payments and fees. Along with the web of assets, Sears Holdings — back when it had money — regularly doled out millions to shareholders in the form of buybacks and made substantial financial bets with its cash.
A good case can be made that the buybacks left Sears with less cash to invest in its business when the industry started undergoing rapid technological and competitive changes. Lampert is a "mastermind of the corporate rule book," in Egelanian's view. Many share that view, and it has fueled court fights. Lampert and a host of associates and controlled companies are defendants in a lawsuit filed by Sears Holdings and unsecured creditors to the old Sears.
With the creation of Tansformco, Lampert cut ties with Sears Holdings. Their complaint against Lampert and others is filled with fiery language even for an adversarial legal action. Pointing to the Lands' End and Seritage spinoffs, they accused Lampert and other shareholders of "thefts of assets," "rank self-dealing" and "numerous other breaches of fiduciary duty.
The plaintiffs alleged that "[a]ltogether, Lampert caused billions of dollars of cash and other assets to be transferred to himself, Sears Holdings's other shareholders and other third parties," and beyond the reach of creditors. In the plaintiff's view, Sears Holdings was insolvent going all the way back to , if not earlier. Lampert and other defendants "knew this but nonetheless continued to pursue further asset transfers for their own enrichment" as the company posted massive losses and rosy projections in budget plans, the complaint alleges.
At the time an initial lawsuit was filed , ESL said in a statement that it "vigorously disputes the claims" against it and Lampert, which the firm said "repeats baseless allegations and fanciful claims. While Sears Holdings spun off assets, it also went through wave after wave of store closures as its retail business weakened and sales fell.
And the shrinking and asset sales continue today under Transformco. In January, for example, the company sold off five Kmart leases to Target. Since it was formed, Transformco has been a private company, meaning the window into Sears' finances and even basic operations has all but closed. Rice said that the company doesn't provide financial information to vendors, which many private companies do under nondisclosure agreements so they can receive trade credit.
Even given the little that is known, it is difficult to find any outsider who thinks Sears and Kmart stores will survive in the long run. The whole company is a husk of what it once was. There is no intention there of [operating] as a legitimate retailer. It's a financial play. There's probably some things to do with property, but as a viable retail business, there's no future there. The waves of store closures since the bankruptcy also raise a question: Why did Lampert bother buying the stores?
Did he really believe there was a future for the retailer? Nobody can know the answer to that except Lampert. Transformco owns other assets along with the Kmart and Sears full-line stores. In mid, the company acquired Sears Hometown , which Sears Holdings had spun off in At the time of the deal, about two years ago, the new Sears acquired Hometown stores and appliance Outlet stores. While listed on Transformco's website, Sears Outlet was actually acquired in by the parent of Liberty Tax services, today known as Franchise Group.
Transformco also appears to own the storied Kenmore appliance brand as well as the Sears Home Services home improvement business. The latter also has a tortured history with Lampert and ESL at the center. While in bankruptcy, Sears Holdings, still under Lampert, had a bid from Service. According to the bidder, Lampert's ESL, which had also tried to buy the services business in the past, derailed multiple attempts by Service.
Finally, a stalking horse bid by Service. After Lampert created Transformco and bought Sears' remaining stores, he cut a deal to buy the home services business as well.
They eventually settled and split the money , with the lion's share going to Sears. Since acquiring the services unit, Transformco has reportedly explored selling it.
So far, it remains with the new Sears company. It's just one more chapter in the legal saga over Sears.
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