If Eddie Lampert thinks he’s going to get out from under his moral obligation to pay severance to longtime employees, he’s got another thing coming. Let me be clear, I’m not an attorney, nor am I an expert on bankruptcy law in either country, but I do know a thing or two about retail, so I feel it’s necessary to say my piece on the subject.
Sears Holdings Corp (NASDAQ:SHLD) is on its last legs despite CEO Eddie Lampert’s best efforts to keep the company afloat. In fact, I’d be surprised to see Sears stock stay afloat for longer than a year. It’s difficult to figure out what exactly is going on in Sears CEO Eddie Lampert’s mind.
Thursday, Lowe’s Companies, Inc. (NYSE:LOW) stock fell 6% without warning. It wasn’t alone as Home Depot Inc (NYSE:HD) fell 4% along with a slew of other retailers. The reason for the mini crash was a headline that Sears Holdings Corp (NASDAQ:SHLD) will be selling a few appliances on Amazon.com, Inc. (NASDAQ:AMZN).
IF YOU CAN’T BEAT ‘EM… Sears to Sell Kenmore Brand on Amazon. Sears Holdings Corp. SHLD 10.60% said Thursday it will start selling its Kenmore appliances on Amazon, loosening its grip on one of its historic product lines and becoming the latest big American brand to capitulate to the online-retail giant. News of Amazon’s move […]
After filing for bankruptcy protection in an Ontario court last month, Sears Canada said Friday that it plans to dole out big bonuses to senior management while the retailer trudges through a painful restructuring, even as thousands of laid-off workers aren't being paid promised severance. According to court documents, Sears - which promised to close 59 stores and eliminate 2,900 jobs across the country as part of a court-supervised restructuring process - will pay up to $7.6 million in retention bonuses to 43 executives and senior managers at the company's head office in Toronto – the same management team that lead the company as sales plummeted and it spiraled into insolvency. As CBC News reports, that works out to an average of $176,744 per employee, although it's unlikely the money will be divided up so evenly. Meanwhile, the company said it won't be paying lower-level employees a severance, which could equate to a loss of tens of thousands of dollars per person. Predictably, the news isn't going over well with the company's laid-off workers. "Why aren't they able to pay us out the severance if they have this [bonus] money?" says Zobeida Maharaj, a laid-off senior operations manager who spent 28 years working for Sears in the Toronto area. "They have no moral values, no compassion, nothing in their hearts." Sears argues that the hefty paydays are necessary to keep the management team from jumping ship as the company restructures. Sears Canada points out that the bonus payments — known as the Key Employee Retention Program (KERP) — have been approved by the Ontario Superior Court. Offering cash incentives during restructuring is common and often necessary to retain key employees, the company said. "A lack of a KERP in this scenario would potentially result in a worse outcome and negatively impact a variety of stakeholders," spokesperson Joel Shaffer told CBC News. In a revelatory twist, the managers who guided the company into bankruptcy stand to profit handsomely by doing so; many could reap enormous bonus payments beyond those mentioned above, including incentive-based payoffs, if they can bring the company through bankruptcy intact. “The executives and senior managers tasked with guiding Sears through the restructuring will earn up to an additional 25 per cent to 100 per cent, on top of their base salary. Most will get their bonuses in quarterly installments, receiving 75 per cent of their payments within six months. The final 25 per cent won't be paid out until a successful restructuring is complete. Sears also plans to pay retention bonuses of up to $1.6 million to 116 senior store employees who will oversee liquidation sales at locations that are closing. That amount works out to an average of $13,793 each and will be contingent on certain sales targets.” But try explaining to recently unemployed Sears workers why the compay should be allowed to pay out these bonuses before the severence payments promised to them and thousands of their peers. [Zobeida ] Maharaj says she can understand paying retention bonuses to store employees working on the front lines. But she argues the big payouts to higher-ups at head office are unfair when ex-workers like her have lost their severance. "I'm shocked as to how they got this grant permitted to have these people — these headquarters [big-wigs] — fill their pockets even more on the suffering of Sears employees," says Maharaj. "We're just the little ants at the bottom." Rosa Dalessandro also wonders why there's money to pay Sears executives when she's losing severance that amounts to about a year's salary. "It's very upsetting," says the former Toronto-based sales manager, who worked for the company for 20 years. Dalessandro was laid off in March and Sears cut off her severance payments last month. This week, the retailer also cut her benefits and she got hit with an unexpected $400 dental bill. "I'm opening all the bills right now and I'm like, 'Wow, wow, wow,' because you don't have money coming in. It's really affected me and my family," says Dalessandro. "It's almost like what they took from us, they're giving to the executives downtown." Sears management argues that the bonuses are necessary to ensure that important employees stick around to help rebuild the company as it struggles through bankruptcy. While it may sound "cold and heartless" to some workers, putting money aside to keep key employees is considered a prudent move, says employment lawyer Adrian Ishak. "These KERPS are a necessary evil." When a company is insolvent, Ishak explains, creditors line up to try to recoup their losses. While laid-off employees are considered low priority, retention bonuses for key staff — if approved by the court — often get top priority because those employees are needed to help restructure the company. "Where you really need to incentivize are people at the top levels, those who are going to be responsible for elaborating the plan, as well as implementing it," says Ishak, a partner with Rubin Thomlinson LLP in Toronto. If key staff manage to successfully restructure Sears, he adds, it will be the best-case scenario for the company's creditors. "If it's a continuing enterprise, there will be far fewer losers," he says. But perhaps the most outrageous injustices can be found at the highest level of Sears senior management, where CEO Eddie Lambert has spent years laying claim to the company’s assets. As we’ve reported, previously if Sears Canada were to go bankrupt, Lambert - also the company's largest shareholder - loses his equity stake, but he remains the company’s principal creditor. Already, Lampert has effectively laid claim to enormous amounts of the company’s assets through loans he’s made. His hedge fund, ESL Investments, also owns large stakes in Lands’ End and a Real Estate Investment Trust that gained control of some of Sears’ best properties in a $2.8 billion deal back in 2015, then leased them back to the company. As is the case in many bankruptcy filings, the owners and managers of the company protected themselves while the company floundered. Now, Sears employees will need to make do without thousands of dollars in wages they had been anticipating.
Nordstrom Inc. (JWN) is one resilient company that continues to progress with store expansion plans despite a backdrop where most retailers are curbing store count.
Zacks Industry Outlook Highlights: Amazon.com, J. C. Penney, Macy's, American Eagle Outfitters and Abercrombie & Fitch
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Is Omni-Channel the Solution to All Retail Issues?
RETAIL BLUES: Sears, Kmart to close 43 more stores. “It is obvious that we don’t make decisions to close stores lightly. Our efforts have been, and will continue to be, fact-based, thoughtful and disciplined, with the goal of making Sears Holdings more relevant and more competitive for our members and other constituents.” The new closures […]
Sears Holdings is closing 43 more stores in the US, in addition to the 265 closings that had already been announced this year.
Sears Holdings Corp (SHLD.O) is closing eight of its namesake department stores and 35 Kmart locations to cut costs and square footage in an effort to return to profitability, Chief Executive Officer Eddie Lampert said on Friday. Once the largest U.S. retailer, Sears has struggled with years of losses and declining sales as shoppers have shifted from the mall to the web. Shares of Sears fell as much as 4.8 percent in afternoon trading.
Sears Holdings Corp is closing eight of its namesake department stores and 35 Kmart locations to cut costs and square footage in an effort to return to profitability, Chief Executive Officer Eddie Lampert said on Friday. Once the largest U.S. retailer, Sears has struggled with years of losses and declining sales as shoppers have shifted from the mall to the web. Shares of Sears fell as much as 4.8 percent in afternoon trading.
Sears Holdings is closing 43 more stores in the US, in addition to the...
Nearly one year after rumors about its upcoming bankruptcy first emerged, overnight US-based denim retailer True Religion Apparel finally threw in the towel when it filed for bankruptcy protection, signing a pre-packaged restructuring agreement with most of its lenders. True Religion, a company whose denims Reuters says have "gradually fallen out of style", filed for Chapter 11 creditor protection in the U.S. bankruptcy court in the District of Delaware (case Case 17-11463), and listed assets and liabilities in the range of $100 million to $500 million (see full filing below). According to the prepack agreement agreed upon by lenders, including TowerBrook Capital Partners, will slash the company's debt by over $350 million. The jean vendor also said it has secured DIP financing from Citizens Bank for up to $60 million. True Religion Brand Jeans is pleased to announce it has secured critical stakeholder support for a comprehensive financial recapitalization of the Company’s capital structure. In signing a Restructuring Support Agreement (“RSA”) with the substantial majority of its Term Loan Lenders and its Sponsor, TowerBrook Capital Partners, the Company will reduce its debt by over $350 million and convert it into the substantial majority of the reorganized Company’s equity. To implement the terms of the pre-arranged restructuring expeditiously, the Company filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware, and expects it will take 90 to 120 days to obtain confirmation of its pre-arranged plan by the Bankruptcy Court. Throughout the implementation of this process, True Religion will continue to operate its business without interruption to customers, employees and business partners. "After a careful review, we are taking an important step to reduce our debt, reinvigorate True Religion's iconic brand and position the company for future growth and success," True Religion Chief Executive John Ermatinger said in a statement. True Religion also said that critical trade creditors are expected to be paid in full and the company would continue to operate business as usual. The restructuring plan provides for full payment of claims of True Religion's continuing trade creditors, which includes continuing vendors, suppliers and landlords. The company listed Wachtell Lipton and Pachulski Stang as legal advisors, while financial advisor is MAEVA Group. For those seeking a culprit for the latest bricks-and-mortar bankruptcy, look no further than Amazon. The denim retailer's financial struggles are due in part to consumer tastes shifting toward online shopping and away from the brick-and-mortar shops and department stores where the company's jeans have been primarily sold. True Religion said the pre-arranged plan could take about 90 to 120 days to receive confirmation from the bankruptcy court. * * * Last October, Reuters reported in October that the retailer had hired a legal adviser to explore several debt restructuring options, as such today's filing should come as no surprise. Finally, with the True Religion bankruptcy filing, here is the full revised Moody's list of which deeply distressed retailer will likely file for bankruptcy next. True Religion Apparel - men's and women's clothing Boardriders SA - sporting subsidiary of Quiksilver The Bon-Ton Stores - parent of department store chain Fairway Group Holdings - food retailer Tops Holding II - supermarket operator 99 Cents Only Stores - discount retailer TOMS Shoes - footwear company David's Bridal - wedding dresses and formalwear seller Evergreen AcqCo 1 LP - parent of thrift chain Savers Charming Charlie - women's jewelry and accessories Vince LLC - clothing retailer Calceus Acquisition - owner of Cole Haan footwear firm Charlotte Russe - women's clothing Neiman Marcus Group - luxury department store Sears Holdings - owner of Sears and Kmart. Indra Holdings - holding company owner of Totes Isotoner Velocity Pooling Vehicle - does business as MAG, Motorsport Aftermarket Group Chinos Intermediate Holdings - parent of J. Crew Group Everest Holdings - manages Eddie Bauer brand Nine West Holdings - clothing, shoes and accessories Claire's Stores - accessories and jewelry Gymboree - children's apparel
Mall-based specialty retailer, Zumiez Inc.'s (ZUMZ) story is no different from the other retailers which are struggling at the moment to combat the effects of soft mall and store traffic, volatile consumer spending and a competitive retail landscape.