Since Sears Holdings Corp. filed for bankruptcy last fall, we haven’t reported much on the progress. Aside from The Toy Association putting out a call to gauge toy industry risk going into the holiday season, there simply hasn’t been a lot of concrete news of real substance—especially in this past week of “will-they-or-won’t-they” liquidation talk. Sears is like a cat, but the looming question is just how many of their nine lives have been spent?
Ahead of this week’s Toy Report, Sears received yet another last-minute reprieve thanks to Chairman Eddie Lampert submitting a new bid through his ESL hedge fund worth more than $5 billion atop a $120 million deposit and an agreement to absorb some additional debts. The stores stay open for now, but the ultimate fate of both Sears and Kmart, along with over 50,000 employees still hangs in the balance. All of the information is fluid, and nothing is set.
There’s still an auction planned for Jan 14., with results of that auction scheduled to be revealed and accepted or rejected by creditors and the court on Jan. 16. Sears could still liquidate, and with the already complicated and convoluted structure of its assets, the pie could be sliced and diced in multiple directions.
Whatever happens, from most accounts the impact to the toy industry will be minimal. Following the disastrous collapse of Toys “R” Us last year, many vendors switched to a cash-up-front model or stopped dealing with Sears altogether—something many others had already done years ago. Looking at the more than 7,400 claims filed from creditors, the highest amounts owed are six-figure invoices largely for house brand products shipped to Kmart stores. Most are much smaller claims, such as the $75,000 owed to Basic Fun! or the $6,000 owed to Toynk, a smaller outfit who sold toys through the marketplace feature of Sears.com and Kmart.com
Even if liquidation can be held-off, many continue to debate whether or not Sears and Kmart even have a place in 2019. One point everyone agrees on is that should they survive, they need to be fully reborn from the ground up—perhaps everyone but Lampert himself, who’s spent years touting customers as “members” and his stores and brands as little more than pieces in an expensive game of Monopoly.
Despite this, a sign of what a ground-up rebuild could be actually exists.
One thing many seem to have missed last fall is that just a week prior to filing bankruptcy, Sears opened a brand-new store in Oak Brook, Illinois—complete with a formal grand opening ceremony featuring Jaclyn Smith.
Could this concept (and similar attention to Kmart) have been the spark to save the company?
Let’s wait and see what next week brings.