Hedge fund titan and failed retail exec Eddie Lampert finally admitted Wednesday what I have been saying for some time, Sears & Kmart are in trouble and may not make it.
Lampert, in an annual filing said, that “substantial doubt exists” about [Sears] ability to continue as a “going concern.” Meaning a bankruptcy filing could soon be in the offering.
With this admission of failure Lampert, who has led the one-time largest US retailer since 2005, will have a hard time getting vendors to provide product for the retailer. Empty shelves will grease the skids for a bankruptcy filing as consumers look elsewhere for apparel and other merchandise.
Shares in Sears cratered 12% on Wednesday closing at $7.98. Since Lampert and his ESL Investment fund took over Sears in 2005 to change the retail paradigm the stock has fallen roughly 93%.
As I have also stressed from the middle of last year, mall operators and investors in commercial real estate focused funds (CMBS and REITs) will be the most harmed as huge anchor tenant spaces go black.
Aside from Sears, both Macy’s and JCPenneys are looking at large store closures, while such stalwart shops like teen apparel and women’s plus sized retailers also shutter stores.
While the Amazon-zation of US retail is to blame for most of the carnage, Lampert’s hedge fund has not suffered too much since taking over although many retail analysts questioned how the chain was operated.
Under Lampert’s ownership ESL has taken huge fees and charges over the years out of Sears, while also selling off many of the iconic brands to competitors, like Die Hard, Craftsman and Eddie Bauer.
So shed no tears for Eddie, but do think about all those people who worked at Sears and their pensions, which are now in question, in a bankruptcy filing.