Sears went from America's largest retailer to 5 stores via financial engineering

Sears was founded in 1886 by Richard Sears and Alvah Roebuck and grew into the world's largest retailer — at its peak operating 2,705 stores in 2011 with 355,000 employees and $53 billion in annual revenue. For decades it was an American institution: its catalog sold everything from clothes to kit houses, and its retail stores anchored shopping malls across the country. But the seeds of its destruction were planted in 2004 when Kmart, fresh out of its own bankruptcy, acquired Sears for $11.5 billion and hedge fund manager Eddie Lampert took control.

Lampert's approach to running Sears Holdings was financial rather than retail. He spun off or sold valuable assets — Lands' End, the Craftsman brand ($900 million to Stanley Black & Decker), DieHard ($200 million to Advance Auto Parts), and Sears Canada — using the proceeds to buy back stock rather than reinvest in stores. Revenue collapsed from $53 billion in 2007 to $16.7 billion in 2018. Stores grew shabby, inventory dwindled, and the company failed to build a credible online presence as Amazon and Walmart pulled away.

On October 15, 2018, Sears Holdings filed for Chapter 11 bankruptcy — the same day a $134 million debt payment came due. The company had 89,000 employees at filing. Eddie Lampert won the bankruptcy auction with a $5.2 billion plan that preserved roughly 425 stores and 45,000 jobs under a new entity called Transformco. The reprieve was temporary: by December 2025, only 5 Sears stores were still operating. The collapse of a 130-year-old retail icon became the cautionary tale of treating a retail business as a portfolio of assets to be harvested rather than a franchise to be built.

Lampert sold brands and real estate to buy back stock instead of reinvesting, shrinking revenue 68% and cutting 2,700 stores to 5 by 2025.

Eddie Lampert treated Sears as a financial asset, not a retail business. He sold brands and real estate to buy back stock rather than invest in stores, employees, or e-commerce.

The Kmart merger gave Sears scale but no strategy. Lampert had no retail experience and the chains were never integrated; they operated as separate brands with declining traffic.

Sears failed to respond to Amazon and Walmart while it had time. Its online presence was weak, stores were understocked, and it had no answer to its competitors' pricing and convenience.

Revenue fell from $53B to $16.7B in 11 years — a 68% loss. Yet Lampert kept extracting value rather than pivoting, selling off the company piece by piece until nothing was left.

A retailer cannot shrink its way to health. Sears' real failure was financial engineering — it stopped investing in stores. When a retailer does that, bankruptcy is a matter of time.