Once mighty US retailer Sears files for bankruptcy

Sears has closed hundreds of outlets in recent years amid increasing prominence of online shopping. (File/AP)
Updated 15 October 2018

Once mighty US retailer Sears files for bankruptcy

  • Sears had been drowning in debt and reportedly could not afford a $134 million repayment
  • Started in 1886, the company was a pioneer of departmental stores that catered to everyone

WASHINGTON: Sears, an anchor of retail life for generations of Americans, filed for bankruptcy on Monday and said it was closing almost 150 stores, the latest marquee victim of the online era.
Founded in 1886 as a mail order catalog company, it went on to pioneer the department store industry, selling all things to all people, and by the mid-20th century had built a vast empire that stretched across North America.
But in recent decades the company struggled in a quickly shifting retail environment, battered by competition from big-box stores and then by the meteoric rise of Amazon and other e-commerce players.
Sears Holdings Corporation, also the parent company for Kmart, which merged with Sears in 2005, said in a statement it had filed for bankruptcy protection in Manhattan.
The company been drowning in debt exceeding $5 billion and reportedly could not make a $134 million payment that had been due on Monday.
S&P Global Ratings on Monday downgraded the company’s debt to ‘D,’ calling the company’s capital structure “unsustainable.” Meanwhile shares in the company had plunged 24 percent just before 1500 GMT.
Edward Lampert, chairman of Sears Holdings, said the insolvency filing would give the company the “flexibility to strengthen its balance sheet” and enable it to accelerate a strategic transformation.
Sears said it intended to reorganize around a smaller store platform, a strategy it said would help save tens of thousands of jobs.
But outside the company, its insolvency was greeted as an ignominious shipwreck.
“Today is a day that will live in retail infamy,” Neil Saunders, managing director at GlobalData Retail, said in a statement.
“That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure.”
Saunders said company leadership had failed to change with the times and that its future was very much in doubt.
“In our view, too much rot has set in at Sears to make it viable business,” he said.
“The brand is now tarnished just as the economics of its model are firmly stacked against its future success.”
Sears Holdings had 89,000 employees as of February, according to a filing with the Securities and Exchange Commission — down from almost 350,000 a decade ago — as well as 547 Sears and 432 Kmart stores.
It announced Monday it would close 142 unprofitable stores near the end of the year, in addition to the previously announced closure of 46 stores by November.
While retaining his chairmanship, Lampert will step down as CEO, with the role handled by other senior executives as part of a new “Office of the CEO.”
Sears added it had received commitments for $300 million in debtor-in-possession financing and was negotiating for an additional $300 million.
Jerry Hancock, a self-described Sears scholar and historian, told NPR the outlet was an “American institution.”
“For the older generation, it’s the changing of the times. Sears was just such an integral part of their childhood, building that American family.”
In the 1890s, the Sears catalog “completely changed American life,” said Hancock, offering consumers exotic items they had seen at the World’s Fair or had read about, like cream separators and Singer sewing machines.
Sears is far from the only iconic retailer to fall by the wayside as more consumers switch to shopping online.
In March, Toys R Us announced it was shuttering all of its US stores while other big names such as Macy’s and JC Penney have also been forced to close numerous locations and lay off workers.
American shopping malls in turn have pivoted toward a new generation of stores, food and entertainment, including players that began online before graduating to bricks and mortar.
Other additions include trendy gym chains, and Dave & Buster’s, whose video game and pro-sports viewing restaurants are emblematic of the “experiences, not stuff” mantra now resonant among consumers.


INTERVIEW: Emirati tycoon plans multimillion-dollar Saudi leisure project

Updated 19 January 2020

INTERVIEW: Emirati tycoon plans multimillion-dollar Saudi leisure project

  • In an exclusive interview, the Al-Habtoor boss reveals his views on the Kingdom, the UAE economy, Trump and Iran

A word often used to describe Khalaf Al-Habtoor — founder and chairman of Al-Habtoor Group, and one of the Middle East’s most venerable business leaders — is “forthright.”

His tweets, TV broadcasts and public statements all display a quality of candid outspokenness rare in senior business leadership in the Arab world.

In the course of an early morning conversation at his headquarters in Dubai last week, he was forthright on a host of subjects, ranging from ambitious expansion plans in Saudi Arabia to the challenges faced by the UAE economy and the global geopolitical scene.

Al-Habtoor is not a man given to diffidence, though he said he would not be sharing his views with the “global elite” preparing to travel to the World Economic Forum annual meeting in Davos next week. “We leave that for the really big people. It’s really entertainment rather than anything else,” he joked.

Entertainment and leisure have been the mainstays of the Al-Habtoor business empire, which is as old as the UAE itself and one of the country’s best-known brands, with interests in construction, real estate, motor distribution and education.

The group has hotel operations in Europe and the US, but the chairman is now looking at Saudi Arabia as a major avenue for expansion, with a multimillion-dollar investment project planned for the Kingdom. The opportunities are mind-boggling, he told Arab News.

“I call Saudi Arabia a continent rather than a country. It has history before Moses and Abraham,” he said.

“We’re seeing now on TV something we’ve never seen before — we see green fields, we see skiing, we see sun and desert. You can’t believe this is the Arabian Peninsula,” he added.

“That makes it very attractive to every tourist or investor because they have variety, because you’re not restricted to one area or sector where you want to build something. You have a choice as to what you can do.”

Al-Habtoor has chosen — in partnership with the Saudi tourism authorities — to back a huge leisure and recreation project outside Riyadh.

It will draw on the successful Habtoor City development in his native Dubai but on a much bigger scale: Up to 7 million square meters of hotels, restaurants, theaters, retail and residential facilities, and — imagine it — lakes and beaches. “You’ll ask me now where does the beach come from in Riyadh. We’ll create it,” he said.

The project is still at the planning stage and subject to final approval from all parties.

It will borrow some of the elements from the successful Habtoor City development in Dubai, notably a Saudi version of the spectacular theatrical production La Perle. But it will not be a straightforward copy of the Dubai attraction, nor indeed of the Dubai development strategy.

“In Dubai, we don’t have oil. If we were dependent on oil, we wouldn’t be like this now. Saudi Arabia has a bigger population — 30 million people, 90 percent of them Saudi, who want to enjoy their lives and their history,” he said.

Born:

• Dubai, UAE.

Education:

• Al-Shaab School, Bur Dubai.

Career:

• Founder and chairman, Al-Habtoor Group.

“We in the rest of the Gulf haven’t seen this history, and I personally would like to go and see this history and see Riyadh, the Eastern Province and the Red Sea.”

Al-Habtoor believes that the Kingdom can use the lessons of Dubai’s development, especially in creating a more liberal social and cultural environment in what is generally regarded as a more conservative country.

“The word ‘conservative’ needs some explanation. The people of Saudi and the UAE are from the same background, the same family. We’re related. When they visit us, they see that,” he said.

“The original people of the UAE are conservative by background, too, but they also enjoy going to restaurants, to the movies, to the theater. They want to go everywhere. They want to be free,” he added, while allowing that there are limitations to freedom.

“Freedom doesn’t mean you should abuse your country, your people or the authorities. You have to protect your culture by educating other people.”

On the question of whether alcohol could ever be served in Saudi Arabia as it is in Habtoor’s UAE establishments, he replied:  “To be honest, I can’t comment on that because I don’t know what their plan is for that.

“But everything is changing, everything is possible,” he added.

The Vision 2030 “masterplan” is changing perceptions of the Kingdom, he said. “It really is an excellent strategy. Everything is clear and transparent. There is a huge future for Saudi Arabia as far as investment and visitors and tourists are concerned.”

Al-Habtoor Group has interests in many sectors of the UAE economy, and from this position the chairman is well qualified to give an authoritative opinion on the challenges facing the country as it prepares for the Expo 2020 business exhibition.

The most pressing worry for economic analysts has been the oversupply of residential and hotel developments, and rising prices that some believe are forcing expatriate workers out of the UAE.

“Well, 2018 wasn’t a very good year, and 2019 was also very slow in the beginning, but by the end of the fourth quarter you could see the signs of improvement in the market. You could see it in retail, things were moving. In the land department, people were buying and selling land and real estate,” he said.

In his car-leasing business, in real estate, luxury cars and his education business, he saw signs that the UAE economy was picking up again. “Definitely. I can see improvement,” he said.

But the volume cars business was lagging, reflecting different spending patterns by expats who often now choose to rent a car long term rather than buy. The rising cost of living was also a big factor, he said.

“Everything is becoming more expensive. The only cheap thing in the country is hotel rooms — they’re among the cheapest in the world,” he added.

“There are too many hotel rooms and residential developments, and it’s not recommended that we should build more.”

The UAE government has taken some measures to limit supply of real estate and hotel projects, which Al-Habtoor thinks is a good thing.

But the introduction of VAT was, in his view, a damaging economic mistake that should be rectified immediately.

“I think it should be cancelled, and also all the money taken should be refunded. The idea of VAT is wrong in my country for the time being. Maybe in the future,” he said.

He would prefer to see the cancellation of sales tax and the scrapping of government fees for services such as visas and business licenses, replaced by a standard rate of income tax.

“I’d recommended they stop all the fees and VAT and let them take from income, like Britain, for example,” he said.

In international affairs, his opinion of US President Donald Trump has wavered between condemnation of his policy to ban travel from some Muslim countries, to warm approval of his current policy toward the Middle East.

Now Al-Habtoor seems overwhelmingly positive on Trump and would like to see him re-elected.

“I said that we need a businessman rather than a politician to lead the world. But whatever he said in the past I think it was just to get elected, and a lot of his supporters didn’t know about us, the Arabs,” Al-Habtoor said.

“They don’t know whether we were terrorists or good people. There are a lot of naive people in the US.”

In particular, he is a firm supporter of Trump’s recent policy toward Iran, though he feels that US sanctions could be better focused.

“If Trump wants to make (Iran’s Supreme Leader Ali) Khamenei and his gangs starve to death, he can do that. So I can’t understand why he isn’t doing that,” Al-Habtoor said.

“There are sanctions, but he’s not killing the rich people. They still eat caviar and the best steaks while the poor people are starving.”

On the US killing of Qassem Soleimani, Al-Habtoor is in complete agreement that it was the right thing to do, but hinted that he believed there was Iranian collusion in the attack.

“It should’ve happened a long time ago. He was the biggest criminal on earth. I think maybe the Iranians wanted him gone, too, otherwise how could the Americans have tracked him? But what happened is good, it doesn’t matter who did it,” Al-Habtoor said.

He is adamant that there should be no further escalation in regional tensions, but believes the next big threat will come from Hezbollah, Iran’s ally in Lebanon.

“I think Hezbollah is more powerful than Iran, and I think (Hezbollah leader) Hassan Nasrallah is the biggest threat to peace in the region,” Al-Habtoor said with forthright finality.

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