STREAMING NOW: Watch Now

Hedge funds have killed Sears and many other retailers

Sears and other retailers that bit the dust recently have two things in common: They couldn't compete with A...

Posted: Oct 16, 2018 7:06 PM
Updated: Oct 16, 2018 7:06 PM

Sears and other retailers that bit the dust recently have two things in common: They couldn't compete with Amazon and Walmart and they were backed by big private equity firms and hedge funds that horribly mismanaged them.

The primary owner of Sears (SHLD) was hedge fund manager Eddie Lampert. His ESL Investments firm bought a controlling stake in Kmart following its own bankruptcy in 2003 and then merged it with Sears.

Business, economy and trade

Company activities and management

Financial performance and reports

Business financial trouble

Bankruptcy

Corporate bankruptcy

Companies

Sears Holdings

Kmart

Banking, finance and investments

Financial markets and investing

Business and industry sectors

Funds and investment trusts

Hedge funds

Private equity

Retail and wholesale trade

Scroll through the list of some other high-profile retail bankruptcies, and you'll notice that Sears isn't the only one that couldn't be saved by the supposedly smartest guys on Wall Street.

Many well-known retailers that ultimately succumbed to bankruptcy were loaded up with debt, making existing problems even worse.

Toys 'R' Us, which closed its doors for good this summer, was backed by private equity firms KKR and Bain Capital as well as real estate investor Vornado Realty Trust.

Bain was also the primary investor in kids' clothing retailer Gymboree, which exited bankruptcy last year but closed 350 stores as part of the reorganization.

The slow, painful death of the mall -- and many of its big tenants

Payless ShoeSource, owned by San Francisco private equity firms Blum Capital and Golden Gate Capital, went bankrupt last year and wound up closing nearly 700 stores.

But wait. There's more! RadioShack, backed by hedge fund Standard General, has gone bankrupt twice since 2015. The hedge fund arm of Wall Street firm Blackstone (BX) owns struggling New York grocery chain Fairway, which filed for bankruptcy in 2016.

The carnage doesn't end there. Private equity ownership has been particularly brutal to once-popular mall-based retailers. The Limited, Wet Seal, Claire's and Aeropostale all went bankrupt and had private equity or hedge fund backers.

And in perhaps the biggest bust of all, Sports Authority, which was bought by private equity Leonard Green & Partners in 2006, shut down for good in 2016 -- leading to the loss of about 14,500 jobs.

"Hedge funds are systematically destroying jobs across the nation," said Carrie Gleason, campaign manager for Rise Up Retail, a worker advocacy group.

"From Toys 'R' Us to Sears, these financial predators are extracting the value out of these retail establishments, forcing the closure of thousands of stores, and throwing tens of thousands of workers into the streets," Gleason added.

Failure to take online shopping threat seriously hurt many retailers too

But bloated balance sheets weren't their only problems. Poor strategies didn't help either. While Amazon (AMZN) may not have necessarily been the sole reason for the collapse of Sears, the rise of digital shopping was certainly an issue.

Some big retailers, like Walmart (WMT) and Best Buy (BBY), have built robust oniine and mobile shopping operations. But Sears and many of the others that went bankrupt failed to adapt to changing retail trends. A physical store is no longer enough.

"Brick-and-mortar retailers are fighting over an ephemeral slice of a shrinking pie," said Jack Ablin, chief investment officer with Cresset Wealth Advisors.

Ablin added that many private equity investors lack the expertise to effectively make the shift from traditional retail to online commerce and that they were also reluctant to commit more capital for the long-term to transform these struggling retailers.

Sears is the fifteenth retailer to file for bankruptcy this year, Ablin noted. It joins other high profile private equity backed casualties Toys "R" Us, shoe seller Nine West and quirky gadget retailer Brookstone.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 95310

Reported Deaths: 2874
CountyConfirmedDeaths
Hinds7063159
DeSoto552159
Harrison382973
Jackson345670
Madison326586
Rankin325677
Lee268368
Jones246879
Forrest245571
Washington221972
Lafayette215439
Lauderdale2044125
Bolivar182366
Oktibbeha177350
Lamar167534
Neshoba1559104
Lowndes152658
Panola146328
Sunflower144546
Warren140250
Leflore139581
Pontotoc125916
Pike123050
Monroe122168
Scott117327
Copiah117133
Coahoma115028
Holmes109558
Marshall109217
Lincoln108353
Grenada107736
Yazoo105530
Simpson102544
Union99324
Tate97637
Leake95338
Adams93037
Wayne89421
Pearl River87353
Marion85735
Prentiss84417
Covington81922
Itawamba79421
Alcorn79111
Newton76723
George76513
Tallahatchie76321
Winston73719
Tishomingo67238
Chickasaw67024
Tippah66517
Attala65425
Walthall59825
Clay58918
Clarke58145
Hancock57721
Jasper56815
Noxubee54816
Smith53114
Calhoun51312
Tunica48313
Claiborne46216
Montgomery45920
Lawrence43112
Yalobusha42814
Perry41918
Humphreys37615
Quitman3725
Stone37012
Greene36617
Jefferson Davis33911
Webster33613
Amite32510
Carroll31512
Wilkinson30318
Kemper28815
Sharkey26513
Jefferson2449
Benton2252
Franklin1923
Choctaw1816
Issaquena1043
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 133433

Reported Deaths: 2349
CountyConfirmedDeaths
Jefferson19441349
Mobile13271291
Montgomery8778179
Madison775480
Tuscaloosa7496119
Shelby584951
Lee582961
Baldwin516550
Marshall390944
Calhoun346641
Etowah342047
Morgan325428
Houston278123
Elmore263247
DeKalb239120
Walker228483
St. Clair227837
Talladega212728
Limestone206120
Cullman188519
Dallas177426
Franklin175529
Russell17442
Autauga173825
Lauderdale168233
Colbert163626
Blount159415
Escambia158425
Jackson154611
Chilton153531
Dale135444
Covington134427
Coffee13078
Pike11879
Chambers115142
Tallapoosa114685
Clarke107717
Marion95729
Butler91339
Barbour8577
Winston73712
Marengo70820
Lowndes65327
Pickens65114
Bibb64210
Randolph63713
Hale62828
Lawrence60922
Geneva5995
Bullock59814
Cherokee59115
Monroe5818
Clay5707
Washington55613
Perry5407
Conecuh53111
Crenshaw53132
Wilcox53111
Henry4865
Macon48020
Fayette4438
Sumter43419
Lamar3632
Choctaw34612
Cleburne3396
Greene30315
Coosa1673
Out of AL00
Unassigned00
Tupelo
Overcast
67° wxIcon
Hi: 75° Lo: 63°
Feels Like: 67°
Columbus
Overcast
66° wxIcon
Hi: 76° Lo: 63°
Feels Like: 66°
Oxford
Overcast
64° wxIcon
Hi: 74° Lo: 60°
Feels Like: 64°
Starkville
Overcast
63° wxIcon
Hi: 74° Lo: 60°
Feels Like: 63°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather