What's killing Sears? Its own retirees, the CEO says

What's to blame for the problems at Sears? Amazon? Bad management?CEO and primary shareholder Eddie L...

Posted: Sep 14, 2018 10:04 PM
Updated: Sep 14, 2018 10:04 PM

What's to blame for the problems at Sears? Amazon? Bad management?

CEO and primary shareholder Eddie Lampert has another idea: It's the company's own retirees.

Sears turned in another bleak quarterly earnings report on Thursday, and Lampert complained about the billions of dollars that Sears owes its former employees through pension plans.

Lampert said Sears has paid almost $2 billion into pension plans in the past five years, and $4.5 billion since Sears and Kmart merged in 2005 to form Sears Holdings. The company pays retirees about $300 million a year, filings show.

If Sears could have put that money into operations, "we would have been in a better position to compete with other large retail companies, many of which don't have large pension plans," Lampert wrote in a blog post.

He also faulted the "very difficult" environment for retailers, but he said Sears has been "significantly impacted" by pension obligations.

Many other analysts have blamed Lampert himself for Sears' misfortunes. They say he made bad decisions about marketing, didn't invest enough in stores and didn't commit to selling online.

Americans' increasing preference to buy online, and at big-box stores rather than malls, is a major problem for the company. Sears has lost $11.7 billion since its last profitable year in 2012.

Lampert is right that the company is at a disadvantage because it once had traditional pension plans, which pay a fixed monthly benefit to retirees as long as they live.

Most businesses today offer what's known as a defined contribution plan, such as a 401(k).

Sears ended its pension plans in 2006, but longtime employees and retirees are still entitled to benefits they accrued while the plans were in effect.

Sears, once the nation's largest employer, has an estimated 100,000 retirees still eligible for benefits under the pension plans, according to a federal regulator. By comparison, the company had only 89,000 employees as of February, and many of them have since left the company because of store closings.

Sears is required to make contributions to pension plans under rules set by the Pension Benefit Guaranty Corp., which provides benefits to retirees whose companies and pension plans go bankrupt.

When pension plans are severely underfunded, or when a company is at risk of bankruptcy — both of which are the case for Sears — the PBGC sets stricter rules.

For example, Sears is getting about $900 million by selling its Craftsman tool brand to Stanley Black & Decker. Under a settlement with the PBGC, Sears must contribute about $250 million of that into its pension plans.

Sears is trying to sell its Kenmore appliance brand as well, and Lampert has offered to buy for $400 million through a hedge fund he controls. But no deal has been reached. One reason could be that Sears needs to work out an agreement with the PBCG on how much of the money would go to pensions.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 159036

Reported Deaths: 3879
CountyCasesDeaths
DeSoto10563104
Hinds10414204
Harrison7397113
Jackson6655128
Rankin6057107
Lee540396
Madison5120107
Forrest394786
Jones376188
Lauderdale3663147
Lafayette341053
Washington3321108
Lamar301950
Oktibbeha255262
Lowndes252867
Bolivar248084
Panola237353
Neshoba2280122
Marshall225051
Leflore211191
Monroe209778
Pontotoc208131
Lincoln200566
Sunflower194155
Warren183058
Tate180451
Union172926
Copiah170840
Pike166760
Scott161330
Yazoo161340
Itawamba159936
Alcorn159328
Pearl River158969
Coahoma155943
Prentiss154931
Simpson154053
Adams147252
Grenada145445
Leake141844
Holmes134461
Covington130040
Tippah130030
George129525
Winston128726
Hancock127641
Wayne123024
Attala122834
Marion121447
Tishomingo114043
Chickasaw110732
Newton110529
Tallahatchie99427
Clay96127
Clarke94853
Jasper87023
Stone82015
Calhoun79513
Walthall79330
Montgomery78426
Carroll75515
Lawrence74614
Smith74216
Yalobusha74228
Noxubee73317
Perry68726
Tunica63019
Greene62422
Jefferson Davis59617
Claiborne59216
Amite57615
Humphreys55219
Quitman5107
Benton50418
Kemper48018
Webster47714
Wilkinson40722
Jefferson38312
Choctaw3637
Franklin3635
Sharkey32917
Issaquena1214
Unassigned00

Alabama Coronavirus Cases

Cases: 256828

Reported Deaths: 3711
CountyCasesDeaths
Jefferson34214511
Mobile20299366
Madison13925150
Tuscaloosa13591156
Montgomery12659238
Shelby1095877
Baldwin9163137
Lee792566
Morgan710851
Etowah677467
Calhoun6695121
Marshall665757
Houston548239
DeKalb504738
Cullman472043
St. Clair451857
Limestone447546
Lauderdale436054
Elmore427564
Walker3818111
Talladega374457
Jackson350723
Colbert336443
Blount310043
Autauga287342
Franklin259734
Coffee254115
Dale242054
Dallas232932
Chilton230841
Russell22813
Covington227934
Escambia206131
Tallapoosa189191
Chambers185950
Pike162214
Clarke161819
Marion146136
Winston141924
Lawrence135336
Pickens127720
Geneva12638
Marengo125224
Bibb123938
Barbour120629
Butler118842
Randolph105922
Cherokee105524
Hale99732
Fayette96316
Clay93525
Washington93319
Henry8946
Monroe83811
Lowndes82129
Cleburne79914
Macon76522
Crenshaw72930
Conecuh72414
Lamar7138
Bullock70919
Perry6927
Wilcox64918
Sumter58922
Greene44218
Choctaw43519
Coosa3724
Out of AL00
Unassigned00
Tupelo
Overcast
45° wxIcon
Hi: 50° Lo: 42°
Feels Like: 45°
Columbus
Overcast
46° wxIcon
Hi: 55° Lo: 43°
Feels Like: 46°
Oxford
Overcast
41° wxIcon
Hi: 43° Lo: 36°
Feels Like: 36°
Starkville
Overcast
43° wxIcon
Hi: 53° Lo: 39°
Feels Like: 43°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather