What's going on?
On Monday, Sears – the 125-year-old US department store chain that was once the country’s largest retailer – signaled the lights might be going out for good as it filed for bankruptcy protection.
What does this mean?
Sears had just shy of $200 million cash in the bank in August – but more than $4 billion of debt. $134 million of that was due on Monday. Unable to pay, Sears’ bankruptcy protection (a.k.a. Chapter 11) gives it an opportunity to restructure, so that those owed money might get some of it back. The company will shut down loss-making stores – which may mean big discounts coming to a Sears near you. Meanwhile, a $300 million loan (yep, another one) will hopefully see it through the Thanksgiving and Christmas holiday sales period – an important time for retailers. Beyond the end of the year, though, Sears’ survival is far from certain.
Why should I care?
For markets: US retail shakes, rattles and rolls on.
According to data released on Monday, “core” retail sales in the US (excluding things like autos, food, and fuel – the prices of which tend to fluctuate from month to month) grew by 0.5% in September (tweet this). Spending growth was probably boosted by low unemployment helping push workers’ wages higher. Sales at clothing stores, furniture stores and via online and mail-order were all on the up – too late to save Sears, perhaps, but a boon to competitors like Home Depot and Lowe’s in homewares and JCPenney and Nordstrom in apparel.
The bigger picture: Out with the old, in with the new.
Once upon a time, Americans could literally buy their house from a Sears mail-order catalog – and almost everything inside it too. But as the catalog was replaced by the website, the 20% of Americans who counted themselves among Sears’ subscribers turned to pastures new. Today, Amazon’s estimated 90 million Prime subscribers make up over a quarter of the US population. The moral: Sears today, gone tomorrow.