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Sears sells Craftsman brand

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Sears’ lenders encourage liquidation rather than reorganization

The Wall Street Journal  /  October 11, 2018

Sears Holdings Corp. met with its lenders Wednesday night to discuss emergency financing for the embattled retailer. The meeting ended without an agreement that would keep Sears operating as a going concern.

A group of lenders, including Bank of America, Wells Fargo and Citigroup are pushing for the company to liquidate its assets under a chapter 7 bankruptcy filing, as opposed to reorganizing the business under chapter 11,

A bankruptcy filing is expected by Monday when Sears must repay $134 million in loans. The situation is fluid…..Sears could still find another source of capital to prop it up through a restructuring.

Sears hired advisory firm M-III Partners to prepare a bankruptcy filing.

The company, which had 866 Sears and Kmart stores as of Aug. 4, has been unprofitable for seven straight years.

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It might be to late to order more Teflon-coated Craftsman coveralls now.

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As future of Sears remains in doubt, the retailer's mail order houses stand tall in Lehigh Valley

Kayla Dwyer, Thw Morning Call  /  December 29, 2018

The first weekend she moved into her Mosser Street home in Allentown, Laurie DeTurk got a puzzling question from a friend who stopped by for pizza.

“Is this a Sears house?”

She paused.

“What are you talking about?”

A trip to the basement quickly revealed the answer. There in a dark corner was a serial code stamped on the side of a wood beam.

It was the telltale proof that DeTurk’s red brick home with a pitched roof came from Sears, Roebuck & Co.

Before the days of Levittowns and McMansions, a slew of companies offered mail order homes in the United States and abroad.

Sears was the largest in the United States, selling as many as 70,000 homes from its Sears Modern Homes catalog between 1908 and 1940.

Customers would pick the design and get nearly all the materials down to the nails delivered to the site, where buyers would hire a contractor or build the homes themselves.

The prices ranged from a couple hundred to a couple thousand dollars — including DeTurk’s 1930 Belmont model, which boasted six rooms and a bath.

But DeTurk knew none of that when she bought the house in 2008.

“Laurie just thought it was cute,” said her boyfriend, Dennis Parry, who lives with her.

Had she known, DeTurk said, she would have been even more attracted to the house.

“It would have definitely been a selling point, because it’s so unique,” DeTurk said.

That quality could be lost to memory if the once-mighty Sears, which began in 1893 and went on to become the country’s largest retailer, doesn’t find a way out of bankruptcy. On Friday, Sears’ chairman, Eddie Lampert, through his hedge fund, ESL Investments, submitted a bid to buy the retailer and keep it alive.

The locations of only a fraction of the 70,000 Sears homes have been documented for posterity.

Sears Archives, a website devoted to the history of the retailer, was collecting data on mail order homes for a while, but that fizzled.

There are enthusiasts scattered across the country keeping regional lists and embarking on street surveys with the aid of Google Street Maps and mortgage records.

One national database kept by the blog Kit House Hunters has surpassed the 10,500 mark, which leaves at least 50,000 left to be discovered.

Pennsylvania ranks third on this list, with nearly 1,500 Sears homes identified. Pittsburgh is listed as a hotbed of houses, nearly reaching the 500 mark.

Cluster in Hellertown

The Lehigh Valley’s own hotbed is in Hellertown, thanks to Bethlehem Steel.

With its burgeoning workforce in mind, Bethlehem Steel bought a plot of land in the late 1930s and drew up plans for the Mountainview neighborhood.

The company commissioned Quaker Construction Co. to start building 300 Sears homes — designs that would be picked out by Steel employees — beginning in 1939.

Jeanette Boos, who lives on Constitution Avenue , remembers her father peeking in on the progress.

“These will never hold up,” he said at the time.

But they did. They formed the basis of a tight-knit community that Marian Van Keuren, then 63, recalled in a letter she wrote in 1998 to the new owner of theBirch Street home she grew up in.

Van Keuren, who has since died, wrote of children spending summer days playing by the creek or making plans to sneak into the Hellertown pool at night, only to chicken out every time. She also recalled singing Christmas carols around a tree at Juniper and Birch roads.

“And Santa Claus would come and give candy to the kids. I think the tree has only been gone a few years,” she wrote.

With Sears’ ending home sales in 1940, the Mountainview orders were among the last placed. In the end, 61 of the planned 300 homes were built.

The neighborhood later expanded with a wave of Cape Cods, including Boos’ home, built by a company called Wills Homes Pennsylvania — but they were not Sears blueprints.

Rebecca Hunter, author of the book “Putting Sears Homes on the Map,” said Bethlehem Steel wasn’t the only company to build Sears homes.

She said Standard Oil Co. built a subdivision for its coal miners in Carlinville, Ill.

On a smaller scale, she said, contractors could make a decent buck advertising their services in the early days of mail order homes.

Built to last

Despite their mail order origins, Sears homes were not shanty towns.

“This thing’s not going anywhere,” Parry said of the Mosser Street home his girlfriend bought. “It’s built 10 times better than houses today.”

Sears sold catalog homes before the days of cheap plywood, using sturdy hardwood from forests that are depleted today, Hunter said.

Most of the nearly 450 designs were small, two- to three-bedroom houses marketed to the “buyer of modest means.”

The listing prices, however, were only for the pieces. They did not include the land, the foundation, the plumbing, heating or lighting fixtures, or the labor.

No surprise, then, that a quarter of the homes’ original owners worked in the construction trade, Hunter said.

The buyer also had to pay the cost of freight. Add all this together, and the end price was probably double the sticker price, Hunter estimated.

Still, that’s a hefty resale value for the vast majority that still stand and would sell in the $100,000-200,000 range today.

Hunter said she saw an Osborn model recently come on the market near her hometown of Elgin, Ill., listing at $199,000. Its catalog price ranged from $1,163 to $2,753.

A Martha Washington — Sears’ flagship model — sold for more than $1 million in Washington, D.C., in 2016. Its catalog price ranged from $2,688 to $3,727 in 1921.

Original owners of the Mountainview Sears homes had to put up a $450 down payment, according to The Morning Call archives. Then they launched into another new territory that Sears, in part, pioneered: a monthly payment plan.

The modern mortgage market took shape after a federal government intervention during the Great Depression. Before that, Sears started offering a form of mortgages with their mail order homes beginning in 1915.

“They figured out they could make way more money financing mortgages than they could selling houses,” Hunter said.

And they did — thousands of them — easily.

“Back then, you applied by filling out a half-page form, one question was ‘Are you employed?’ ” Hunter said. “That’s all they wanted to know. And then, ‘OK, we’ll give you money.’ ”

A typical five-year plan was $25 to $30 a month. The Mountainview homeowners had payments of $33.80 a month.

But during the Great Depression, Sears lost at least $8 million in uncollected mortgages, Hunter said, forcing it to repossess those homes and halt its mortgage program in 1933.

That might explain why it’s a lesser-known part of Sears’ home-selling legacy.

“I just think it’s neat to have something that no longer exists anymore, and it was just such a strange thing in our past that you actually were able to do it,” DeTurk said recently. “I think that’s so neat, that you could just … pick it.”

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Nice article KS. A friend of mine has his grandpas sears kit home sitting out on an old farmstead. Super neat house and it’s a shame that it’s just sitting there. They offered to give it away but once people found what it costs to move it you could buy or build one for the same ballpark price considering you’d need a foundation built, re-wire it, re-plumb it and remodel the entire interior. 

Edited by HeavyGunner

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After months of speculation surrounding Sears’ fate, a federal judge has given the iconic U.S. retailer a fresh start.

Judge Robert Drain approved the company’s sale to the hedge fund of its chairman — Eddie Lampert — for $5.2 billion.

Sears filed for bankruptcy protection in October and appeared to be on the brink of liquidation before Lampert’s ESL Investments made an offer.

The sale will result in 425 Sears stores staying open, as well as 45,000 people keeping their jobs.

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Edward Lampert’s Plan for Sears: Smaller Stores, Less Apparel

The Wall Street Journal  /  February 13, 2019

Edward Lampert, who steered Sears into bankruptcy and kept it alive with a $5.2 billion offer for its assets, says he will sell or sublease some of the 425 remaining stores, devote extra space to tools and appliances, and open more smaller stores.

Edward Lampert has a plan for Sears after its trip through bankruptcy: smaller stores and less apparel.

The hedge-fund manager, who steered Sears into bankruptcy and kept it alive with a $5.2 billion offer for its assets, says he will sell or sublease some of the 425 remaining stores. He plans to devote more of the retail space to tools and appliances. He also wants to open more smaller stores, similar to one in Oak Brook, Ill., which at 62,000 square feet is about one-third its original size.

“Our goal is to continue to shrink the size of our stores,” Mr. Lampert said in his first interview since his rescue plan was approved by the bankruptcy court this week. “If I had my druthers, I’d rather be bigger than smaller. We still have enough of a critical mass.”

The restructured company, which doesn’t yet have a new corporate name, will be composed of 223 Sears stores and 202 Kmart locations, as well as the Kenmore and DieHard brands. Sears sold its Craftsman brand to Stanley Black & Decker in 2017 but retains a license to sell products under the name.

Mr. Lampert said he would remain the company’s chairman but would hire a new CEO to carry out his vision. The billionaire, who rescued Kmart from bankruptcy and merged it with Sears in 2005, had served as chief executive since 2013, but he relinquished that role when the company filed for bankruptcy in October.

The shrunken Sears will compete against bigger retailers such as Home Depot Inc., Lowe’s Co s., Best Buy Co. and Amazon.com Inc. After closing hundreds of stores in recent years, it will lack the economies of scale and negotiating clout with suppliers that the larger players wield.

“They have already been category-killed by the big box chains,” said Burt Flickinger, managing director of consulting firm Strategic Resource Group. He said Mr. Lampert’s idea of focusing on so-called hard lines was a good one, but is a decade too late. “They have lost the confidence of the vendor community,” he continued. “Sears and Kmart prices are no longer competitive.”

Once the largest seller of major appliances in the U.S., Sears has fallen to fourth place, behind Lowe’s, Home Depot and Best Buy, according to research firm TraQline. But it still commands a 12.9% share of the market, which has $36 billion in annual sales, giving it a position from which to rebuild. With J.C. Penney Co. recently announcing it would no longer sell appliances, Sears has one less competitor in the mall.

“They have a shot, but it’s a long shot,” said Craig Johnson, president of consulting firm Customer Growth Partners. “Most of the profits on appliances are made on the servicing side, and Sears still has a good service business.”

In addition to the retail stores and brands, the restructured company includes Sears Auto Centers, Sears Home Services and logistics company Innovel Solutions Inc., which operates 11 warehouses, a fleet of trucks and specializes in delivering appliances.

One challenge is that appliances are purchased far less frequently than apparel, giving shoppers fewer reasons to visit a store or website on a regular basis. Mr. Lampert’s answer is his company’s Shop Your Way loyalty program. Points can be earned not just at Sears and Kmart, but also at partner companies, including Ulta Beauty and Uber.

“Shop Your Way has always been our answer for how we’re going to be more relevant,” Mr. Lampert said.

During a court hearing last week, a lawyer for the creditors’ committee questioned the Shop Your Way program, noting it has consistently missed expectations. A Sears executive acknowledged that targets had been missed, but said the program would be a cornerstone of the company going forward.

Mr. Lampert said Sears didn’t need to win over new customers, and could survive by doing more business with existing shoppers, something other retailers have echoed by launching loyalty programs that reward their best customers.

The Sears chairman said he hoped to win back suppliers now that the company was in better financial health. “We have a clean balance sheet,” he said, referring to the roughly $4 billion of debt and pension obligations that were eliminated through the bankruptcy process, including $1.3 billion that was owed to Mr. Lampert’s hedge fund. “We hope suppliers take a more constructive approach.”

Mr. Lampert said Sears didn’t always get credit for its innovations such as introducing curbside pickup and equipping its sales staff with iPads before it became fashionable to do so.

“We did things before others,” he said. “The problem is they didn’t end up mattering enough. Whether we didn’t do it well enough or we ran out of time, or we didn’t market it enough. It wasn’t the ideas, it was making them matter and turning them into profit.”

Although Mr. Lampert is buying the best Sears and Kmart locations, not all of them are profitable. “It would be very difficult to keep all 425 stores open,” he said. “We would like to maintain a presence in at least the stores that we’re in. That may be in a different location in the mall, if we were to sell the store, or sell and lease back part of the store.” In addition, Mr. Lampert is buying a number of stores that have already closed. He said those locations would probably not reopen and would likely be sold.

He said a lot depends on the mall owners. “The mall owners are very influential,” Mr. Lampert said. “They were not rooting for the company to emerge from bankruptcy.”

The restructured company is controlled by Mr. Lampert, but he doesn’t want Sears to stay a private company indefinitely.

“Being private has certain advantages of being able to do things that public investors wouldn’t endorse,” he said, adding that must be balanced against the opportunity to raise capital as a public company.

“If I am a betting person, which I am, I would say at some point we would be public again,” Mr. Lampert said.

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