Transformco

Transform SR Brands LLC[4] (doing business as Transformco, referred to as "New Sears")[5] is an American privately held company formed on February 11, 2019, to acquire some of the assets of Sears Holdings Corporation. The new company is owned by Eddie Lampert's ESL Investments hedge fund of Greenwich, Connecticut. Following the Chapter 11 bankruptcy filing of Sears Holdings on October 15, 2018, Transformco purchased the surviving assets owned by Sears Holdings for $5.2 billion.[1]

Transform SR Brands LLC
Transformco
Private
IndustryRetail
Genre
PredecessorsSears Holdings Company
FoundedFebruary 11, 2019 (February 11, 2019)[1]
FounderEddie Lampert
Headquarters
Hoffman Estates, Illinois
,
U.S.
Number of locations
  • 596 (February 2020, Including Sears Hometown)[2]
Areas served
Key people
  • Eddie Lampert (chairman)
  • Leena Munjal (Chief Digital Officer)
  • Greg Ladley (President of Apparel and Footwear)
  • Robert A. Riecker (CFO)
OwnerESL Investments
Number of employees
45,000 (2019)[3]
Subsidiaries
Websitehttps://transformco.com/

On June 3, 2019, it was announced that Transformco would acquire Sears Hometown and Outlet Stores. As per deal, Sears Hometown might need to divest its Sears Outlet division to gain approval.[6]

History

Background: Fall of Sears Holdings
Main article: Sears Holdings § History

On November 17, 2004, the management of Kmart Holding Corporation announced its intention to purchase Sears, Roebuck and Co. under a new corporation.[7] Kmart previously emerged from Chapter 11 bankruptcy protection on May 6, 2003. The new corporation became known as Sears Holdings Corporation, simply known as Sears Holdings. The new corporation announced that it would continue to operate stores under both the Sears and Kmart brands. The merger of Kmart and Sears closed on March 24, 2005, following affirmative shareholder votes of both companies. The result of the merger was Kmart and parent Kmart Holding Corporation and Sears became subsidiaries of the new Sears Holdings Corporation. Sears Holdings then operated Sears and Kmart stores. The company continued to market products under brands held by both companies. The merger was completed on March 24, 2005, after receiving regulatory approval from the government and approval by shareholders of both companies.[8] The combined company had approximately 3,500 stores at the time of the merger.[9]

Eddie Lampert led the company for the next thirteen years. (See Sears Holdings#History for more detailed history of the intervening years.)

On October 10, 2018, it was reported that Sears Holdings had engaged advisors regarding an imminent bankruptcy filing.[10][11]

The company filed for Chapter 11 bankruptcy protection on October 15, 2018, in New York; the same day that a $134 million debt payment was due.[12]

On October 15, 2018, Sears Holdings announced that it would close 142 stores, including 63 Kmart stores and 79 Sears stores.[12][13] Sears Holdings' bankruptcy also marked Kmart's second bankruptcy in 16 years. On November 8, 2018, Sears Holdings announced it would close an additional 40 stores, including 11 Kmart and 29 Sears stores.[14] On November 23, 2018, Sears Holdings released a list of 505 stores, including 239 Kmart and 266 Sears stores, that are for sale in the bankruptcy process while all others are currently holding liquidation sales.[15] However, the stores for sale are not guaranteed to be protected from liquidation in the future. On December 28, 2018, Sears Holdings announced it would close 80 additional stores, including 37 Kmart and 43 Sears stores.[16]

In a proposal announced in early January, Sears Holdings plans only to keep 202 Kmart stores along with 223 Sears stores open, assuming that it survives the bankruptcy process. Most of the proposed locations are in highly populated coastal regions.[17]

On January 15, 2019, when it had appeared that Sears Holdings was preparing to file for Chapter 7 liquidation, the bankruptcy court judge ordered the company to return to negotiation table and work out a new deal with Eddie Lampert to prevent the liquidation from occurring. A new deal was struck at the last minute that would keep up to 400 Sears and Kmart stores operating.[18] On January 19, 2019, Sears Holdings officially announced that they had won the auction, and that some of the then existing stores were to remain open.[19]

On January 24, 2019, a group of unsecured creditors, which included Simon Property Group, filed a motion with the bankruptcy court to overturn the deal Sears Holdings had recently made with Lampert claiming that Lampert had been "engaged in serial asset stripping" of the company at the expense of suppliers and landlords. The creditors had requested that the bankruptcy court rule to have the company be liquidated instead of being reorganized so that the creditors would be able to recover more money that was still owed to them.[20] On January 28, the federal government-operated Pension Benefit Guaranty Corporation announced that they were not in favor of the current Sears Holding agreement with Lampert since that agreement would create a $1.7 billion funding gap in the employee pension fund that would require the American tax-payers to cover the shortfall.[21] In papers filed on February 1 with the bankruptcy court, ESL "outlined plans to close three Kmart stores per month in 2019" if the court decides to accept ESL's purchase bid.[22]

In February 2019, it was announced that a U.S. bankruptcy judge approved the sale of the most lucrative part of Sears Holdings to Edward Lampert allowing the surviving part of the company that operates both Sears and Kmart to remain in business at the expense of suppliers, landlords, employees, pensioners, the U.S. government, and other creditors. Kmart would have 202 locations after the sale is completed.[23]

Birth of Transformco

In February 2019, the company finalized the acquisition of 425 stores (223 Sears and 202 Kmart) from Sears Holdings for $5.2 billion. Stores not purchased by Transform were immediately liquidated.[1] During bankruptcy proceeding of Sears Holdings, ESL, the parent company of both "old Sears" and "new Sears", told the court that it had "plans to close three Kmart stores per month in 2019" if the court decides to accept ESL's purchase bid.[22][24]

On June 3, 2019, it was announced that Transformco would acquire Sears Hometown and Outlet Stores. As a part of the deal, Sears Hometown may need to divest its Sears Outlet division to gain regulatory approval.[6] At the time announcement, Sears Hometown and Outlet Stores had 491 Hometown stores and 126 Outlet stores in 49 states, Puerto Rico and Bermuda.[25] 98% of the Hometown stores are owner operated franchise operations.[26]

On October 23, 2019, Sears Hometown and Outlet Stores completed its sale of its Sears Outlet division to Franchise Group, Inc[27] while Transformco completed the acquisition of the remainder of Sears Hometown at the end of the same business day.[28] Sears Hometown had 414 stores at the time of its acquisition by Transformco in October 2019.[29]

In June 2019, Sears customers discovered that they are having a hard time getting warranties honored for items previously purchased from Sears.[30]

New store closures

On August 6, 2019, it was announced that Transform will be closing 26 stores, including 5 Kmarts and 21 Sears stores, in October. these closing would result in approximately 380 remaining stores.[31] On August 31, 2019, It was announced that Transform would close an additional 92 stores, including 77 Kmarts and 15 Sears stores, by the end of 2019.[32]

On November 7, 2019, it was announced that Transformco would close an additional 96 stores, including 45 Kmarts and 51 Sears stores, February 2020, leaving 70 Kmart stores in 19 states, Guam, Puerto Rico, and United States Virgin Islands, and 123 Sears stores, respectively.[2] At least one source reported in November 2019 that Transformco would have a total of 182 full Sears and Kmart stores remaining after the 96 announced stores were closed by February 2020.[29]

In December 2019, Transformco sold the DieHard brand to Advance Auto Parts for $200 million.[33] Under this agreement, Sears and Kmart can continue to sell DieHard branded batteries through their stores while Advance Auto Parts has exclusive rights to the DieHard brand in the automotive and vehicular supplies and service industries.[34]

On February 6, 2020, Transformco announced an additional closure of 15 Kmarts and 26 Sears, effective to close around April 2020. Throughout June and July 2020, Sears' job website has indicated that over twenty more stores are closing.[35]

Subsidiaries
Main articles: Kmart and Sears

Current

Kmart division
  • Kmart – a chain of discount stores that are usually free-standing or located in strip malls. They carry most standard department store stock as well as a limited selection of grocery items.
    • Kmart stores – chain of discount department stores that are usually free-standing or located in strip malls.
    • Big Kmart stores – chain of discount department stores that carried everything a regular Kmart carries, but emphasizes home decor, children's clothing, and more food items.

Sears division
  • Sears – a chain of department stores that are usually located in shopping malls, with a few freestanding locations. These stores carry traditional, middle-class priced department store items as well as an expanded appliance and tools section.
    • Sears Grand – a sub-chain of Sears stores, typically located away from shopping malls and arranged in a fashion similar to a big-box store. Many Sears Grand locations are retrofit remodels of existing Kmart or Sears stores in freestanding locations. They carry an expanded inventory, as compared with full-line Sears Department Stores, and can range from 165,000 to 210,000 square feet (15,300 to 19,500 m2).
    • Sears Home Services – a division of Sears that specializes in appliance repair, lawn and garden services, HVAC service, as well as most in home services. Sears Home Services can also do repair on small appliances in-store.
    • Sears PartsDirect – a chain of lawn-and-garden equipment and appliances parts stores. Some stores, branded as Sears Parts and Repair Centers, feature a carry-in point for customers to bring merchandise in that needs to be repaired either in- or out-of- warranty.
    • Sears Home & Life - a chain of stores that sells "hardline" goods such as appliances, tools, mattresses and lawn and garden equipment. These stores are free standing and are between 10,000 and 15,000 square feet in size.
  • Sears Hometown - sells home appliances, lawn and garden equipment, apparel, mattresses, sporting goods, and tools. All stores in this division are individually owned and operated by independent franchisees.[6][36][37]
    • Sears Hometown Store - stores that sell Sears merchandise.
    • Sears Home Appliance Showroom - Home appliance showrooms display merchandise in-stores.

Other subsidiaries
  • DieHard Auto Center – launched in 2017, these full-service auto care centers are similar to Sears Auto Centers although they are not attached to Sears stores. Specialize in DieHard-branded auto products.[38]
  • Shop Your Way – a customer loyalty program shared between all subsidiaries.
  • A&E Factory Service – a joint venture held by Whirlpool and Transformco that performs mobile appliance repairs.
    • Wally Labs – a subsidiary created when Sears Holdings purchased the rights to WallyHome sensor technology from SNUPI Technologies in 2015. The company provides technology for home safety, security, and loss prevention.
    • Monark Premium Appliances – Premium appliance showrooms for architects, builders, designers, developers, and homeowners to browse.[39]

Former

Kmart division
  • Kmart – Kmart closed down or sold these divisions:
    • KGRO – a brand of Kmart that is used exclusively in each store's Garden Shop. While in the past it covered such things as KGRO garden and power equipment, today it still stands as Kmart's brand of fertilizers and plant seeds.
    • K-Fresh – a new format that was implemented in several Super Kmart Center locations, which extended the grocery section into a store-within-a-store model.
    • mygofer – a hybrid-online retail concept launched in spring of 2009, where products are ordered ahead of time and then are either shipped to the customer or held at a local Kmart for the customer to pick up.

Sears division
  • Sears – Sears closed down or sold these divisions:
    • Sears Hometown and Outlet Stores
      • Sears Appliance and Hardware Store - Sears appliance and hardware stores were hardware stores that carry the entire line of Sears hardware and appliances. As of September 2019, there are no more locations left.[40]
      • Sears Outlet Stores - outlet version of Sears department stores located in various retail locations across the U.S., as well as online. Sold to Franchise Group, Inc in October 2019.[27][28]
    • Innovel Solutions – Former known as Sears logistics, acts as the supply chain arm for Sears Holding Company and served clients such as Costco, the Air Force Exchange, the Navy Exchange, and former Sears brand Lands' End. The company specializes in storing and moving items of all sizes, including furniture, large appliances, and even entire wine cellars. Providing final mile' delivery, complete installation and white glove capabilities for 'big and bulky' products across the United States and Puerto Rico. Sold to Costco on March 17, 2020[41]

Allied brands that are owned and operated by third parties

Independent companies that provide services under the Sears brand:

  • Sears Credit Card - Sears credit card and Sears MasterCard is owned and operated by Citibank since 2003.[42]
  • Sears Flowers - an online store that is owned and operated by Teleflora which sells Flowers, Plants and gifts for same day delivery via the Teleflora network.[43]
  • Sears Optical - a licensed brand that was owned and operated by Luxottica until February 2020. They previously provided comprehensive vision exam, contact lenses, diagnostic and medical treatment of eye diseases, urgent care, cataract and glaucoma surgery consultation/referrals, low vision treatment, and eyeglass dispensary.[44] Luxottica terminated their relationship with Sears and closed all remaining Sears Optical locations in February 2020.[45][46]
  • Sears Travel - an online travel agency that is owned and operated by International Cruise & Excursion Gallery which provides online and telephone-based booking services for Sears customers through the SearsTravel.com website.[47]

Lawsuit

In March 2019, Sears Holdings sued Transformco for $57.5 million it says it is owed from the sale. Sears Holdings also says Transform owes it $41.3 million for credit card and cash transactions that occurred before the sale closed, as well as $16.2 million for a portion of February rent. A hearing on the matter was anticipated to take place on March 21, 2019, according to the court documents.[48]

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gollark: Like I said, this is a *great* example of dealing with one manifestation of a problem instead of actually solving it.

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