Chris Hill: In news that really can’t be a
surprise to anyone who has a basic understanding of how math works, Sears has hired advisors
to help the company prepare for bankruptcy. Shares of Sears down 35% today. Matt Argersinger: Yeah, once
you DIP, there’s no going back. When I say “DIP,” I mean debtor in possession,
which is the loan they’re seeking, which is a loan that provides short-term financing. It’s the most senior of debts that you get
when you’re in bankruptcy, just to keep the business and the lights on
until everything can be sorted out. That’s what’s happened to Sears. Chris, as
you said, it’s really no surprise that we’re here. What’s most surprising to
me is actually how we got here. Step back 20 years ago, you could have said,
“The world is changing a little bit. I can see this e-commerce thing going. I can see
Walmart and Target having all this success. Sears feels a little behind. The stores are older, the catalog
business isn’t as strong as it used to be. Eventually, maybe, this is
a retailer that’s not going to be around.” But what happened was, it had this weird end
to it, which is, Eddie Lampert comes in, and it becomes a story of not just a retailer
that’s going bad, but a financial engineering story. A value investor with a great track record
at the time comes in, he buys Kmart, then mergers Kmart with Sears. It becomes
a real estate play, it becomes an asset play. It becomes, “I can raise money, I can pay
down debt, I can buy back stock. I can create this investment vehicle
that’ll be really successful.” But it was always built on a crumbling
foundation, which is the Sears business. All of that other stuff didn’t
put customers back in the stores. Stores declined over time. There was
no reinvestment in the core business. I think that was ultimately what happened,
and it’s why we’re here today, with Sears essentially on the verge of bankruptcy.
Hill: The Wall Street Journal had a line today. For people who are not looking at the business
news every day, for people who are not focused on investing every day, it’s probably easy
to just say, “Well, this is the narrative that has played out over the last 20 years,
which is the rise of e-commerce and bricks and mortar going down.” The line in the Journal is, “The company was
not helped by Mr. Lampert’s unconventional approach to retailing,” pointing out that,
among other things, he really resisted investing in upgrading the stores and
that sort of experience. One other thing I’ll throw in there with the
financial engineering is the brands that Sears owned, that was part of Lampert’s
strategy, as well. “Well, if we need a little bit
of money, we can sell those.” They sold off the tool brand that they had.
Argersinger: Craftsman, Lands’ End was spun off. Hill: Yeah. It’s kind of sad to see, but, again — I was
saying this right before we started taping — I’m not sure what I’m more surprised by,
the fact that we’ve been doing this show for nearly eight years, or that we’ve been talking
about Sears going bankrupt for nearly eight years, and they’re still in business!
Jason Moser: That headline is killing me. It talks about possible bankruptcy.
I mean, come on, man! This thing is imminent! Just say that they’re getting everything in order
to go ahead and file for bankruptcy. It’s imminent! It’s not possible anymore!