Sears — The Amazon of 1893, Strip-Mined by Its Own Hedge Fund
Summary
Sears, Roebuck & Co. sold America almost everything for more than a century, and on October 15, 2018 its parent, Sears Holdings, filed for Chapter 11 bankruptcy. Founded in 1893 as a mail-order house, Sears built the most influential retail catalog the country ever produced — a fat annual book from which a farm family could order a sewing machine, a suit, a tombstone, or, between 1908 and roughly 1940, an entire house shipped in numbered pieces by rail. It was, in every meaningful sense, the Amazon of its age, and it parlayed that into the largest retailer in the United States, a position it held through the 1980s with something on the order of 350,000 employees. At its physical high-water mark in the late 1990s it ran on the order of 3,500 stores under the Sears name (figures vary by what one counts, and later Sears Holdings counts ranged from roughly 2,700 to 4,000 across both banners).
What killed it came in two waves, and the second makes this a parable rather than a tragedy. The first was ordinary competitive failure: Walmart passed Sears in sales around 1990, Target took the style-conscious middle, and Amazon — running, with some irony, the exact mail-order-at-scale model Sears had invented — took the catalog's whole reason for being. Sears, slow and over-stored, did not adapt. The second wave was financial. In 2005 the hedge-fund manager Eddie Lampert merged the ailing Sears with the ailing Kmart into Sears Holdings, and over the following decade the combined company was steadily hollowed out: its best brands sold off, its real estate spun out from under it and rented back, and its losses funded by loans from Lampert's own ESL Investments, which became both the company's controlling owner and its largest creditor.
By the time it filed, Sears Holdings listed some $11 billion in liabilities. Lampert's ESL then bought a remnant of roughly 425 stores — about 223 Sears and 202 Kmart — out of bankruptcy for around $5.2 billion, mostly by crediting the debt it was already owed, preserving perhaps 45,000 jobs. That remnant, operated as Transformco, has since dwindled to almost nothing: as of late 2025 there were five Sears stores left in the country.
What was lost is not abstract. Sears shed hundreds of thousands of jobs over its long decline; at the 2018 filing it employed around 68,000, down from its mid-century peak. Its pension plans, covering roughly 90,000 workers and retirees and underfunded by about $1.5 billion, were handed to the federal Pension Benefit Guaranty Corporation. The catalog colossus that taught America how to shop at a distance was, in the end, dismantled at a distance — by spreadsheet.
Timeline
The Wish Book Builds an Empire
Sears began as the right idea at the right moment, executed at a scale no one had attempted. In the 1890s, most of America lived rurally and shopped at a single general store that set its own prices, stocked what it pleased, and answered to no competitor for miles. Sears, Roebuck offered an alternative that now sounds eerily familiar: a vast, illustrated catalog with fixed and printed prices, an enormous selection that no local store could match, a money-back guarantee, and delivery to the door by mail and rail. It was distance commerce — selection and convenience traded against the inability to touch the goods — and it worked so completely that the catalog earned its nickname, the "Wish Book," and a place in the outhouse as well as the parlor.
The audacity peaked, fittingly, with the houses. From 1908 into the late 1930s, a customer could open the Modern Homes catalog, choose a design, and receive an entire dwelling — thousands of pieces of pre-cut, numbered lumber, plus nails, paint, and a how-to manual — delivered in two boxcars to the nearest depot. Tens of thousands of "Sears homes" went up across the country, and many still stand. A company that will ship you a house by mail has understood something durable about logistics and trust, and for the better part of a century Sears rode that understanding from the catalog into the store. By 1925 it was opening retail outlets; by mid-century it anchored the new American shopping malls and owned the categories that defined middle-class aspiration — Kenmore appliances, Craftsman tools, DieHard batteries, the Allstate insurance it spun off into a giant of its own. When the Sears Tower topped out over Chicago in 1973, it was the tallest building in the world and the headquarters of the largest retailer in it.
The Slow Surrender to Walmart, Target, and Amazon
The empire's problem was that the things which made it dominant aged badly. The catalog that conquered rural distance lost its purpose as cars, highways, and suburban stores brought selection within easy reach; Sears finally shut the famous "Big Book" in 1993, the year of its centennial, just as a website would have been worth starting. The department-store format that anchored the mall began to drain as the mall itself did. And the broad, do-everything positioning — clothes and tools and tires and refrigerators under one roof — left Sears outflanked on every side at once: undersold by Walmart, which passed it in sales around 1990; out-styled by Target; and out-specialized by the category-killers in electronics, home improvement, and apparel.
Then came the company that had, in effect, photocopied Sears's founding playbook. Amazon was mail-order-at-scale with fixed prices, deep selection, and delivery to the door — the 1893 model rebuilt on fiber optics — and the incumbent that had invented the genre proved unable to relearn it. The merger with Penney-style rivals never came; the e-commerce build-out came late and underfunded. By the 2000s Sears was a chain of aging, under-invested boxes selling a little of everything to fewer and fewer people, its real competitive assets reduced to a handful of beloved house brands and a great deal of valuable real estate. That combination — weak operations sitting on strong assets — is precisely the profile that attracts a certain kind of investor.
The Hedge Fund That Was Also the Landlord and the Lender
Eddie Lampert arrived in 2005 not as a retailer but as a financier who had taken control of Kmart out of its own bankruptcy and used it to buy Sears, fusing the two into Sears Holdings. The thesis, charitably read, was that a disciplined capital allocator could manage the combined company's decline more profitably than its sentimental insiders had managed its growth. In practice, the decade that followed reads as a careful disassembly. The profitable Lands' End brand was spun off to shareholders in 2014. In 2015, hundreds of the best Sears-owned stores were sold to a newly created real-estate trust, Seritage, for about $2.7 billion — and then rented back to Sears, which now paid roughly $134 million a year, rising annually, to occupy buildings it had owned outright. Craftsman, the tool brand customers trusted enough to be a reason to enter the store, went to Stanley Black & Decker in 2017 for around $900 million.
The arrangement that drew the most scrutiny was the financing of the losses. As Sears bled cash, the loans that kept it alive came substantially from ESL — Lampert's own fund. He was thus simultaneously the company's controlling chairman, its largest creditor, and, through Seritage (where he was also chairman and a major holder), one of its landlords. Each role can be defended in isolation; stacked together they meant that as the operating business shrank, value flowed steadily toward entities Lampert controlled, secured against the very assets being sold off. Sears's unsecured creditors — largely the suppliers left holding unpaid invoices — later alleged in litigation that Lampert and associates had "stripped Sears Holdings of billions of dollars in value." The defendants admitted no liability, the plaintiffs acknowledged they had acted in good faith, and in 2022 the dispute settled for $175 million, most of it paid by insurers.
The bankruptcy itself came on October 15, 2018, timed to a $134 million debt payment Sears could not make, with roughly $11 billion in liabilities on the books. Lampert stepped down as chief executive but remained chairman, and a few months later ESL returned as the "stalking horse" bidder, buying about 425 surviving stores for some $5.2 billion — paid largely by canceling the debt Sears already owed it rather than in new cash. The man who had owned, lent to, and leased to the company now bought what was left of it. Left outside the deal were the pensions: plans covering about 90,000 workers and retirees, underfunded by roughly $1.5 billion, assumed by the federal PBGC. The financial structure survived the company it was built around.
The Five Factors
Aftermath
The human ledger admits no wry framing. Over its long descent Sears shed hundreds of thousands of jobs; at the 2018 filing it still employed around 68,000, against the roughly 350,000 of its mid-century height, and tens of thousands more went as the remnant kept shrinking. The pension plans covering some 90,000 people, underfunded by about $1.5 billion, were taken over by the PBGC — retirees kept guaranteed benefits while the company that promised them did not pay them, a public backstop absorbing a private failure. For the towns where a Sears anchored the mall, the closure pulled foot traffic out from under neighboring stores and left the now-familiar dead-mall silhouette.
The brand limps on. Transformco, controlled by ESL, operated the surviving stores and the online presence; by late 2025 the count was down to five Sears stores, with the name reduced largely to licensed appliances and a website. Seritage spent the following years selling and redeveloping the real estate it had acquired. The Craftsman name thrives — under Stanley Black & Decker. Lands' End is an independent company. The pieces, in other words, mostly live; the whole does not.
The lasting mark is twofold. Sears is the textbook case of an incumbent that invented distance retail and could not see it reborn online — taught alongside the obvious irony that its successor, Amazon, simply rebuilt the Wish Book with better logistics. And it is the anchor-store cautionary tale for the financial-engineering era: the spin-offs, the sale-leaseback, the owner who was also the lender and the landlord. Whatever a court ultimately found about good faith, the structure became a byword for how a 125-year-old institution can be solvent in parts and dead as a whole.
Lessons
- Re-win your founding advantage in every era; the breakthrough that built the company (here, mail-order selection at scale) will be handed to a competitor by the next shift in technology, and nostalgia for the old format is not a strategy.
- Do not confuse a beloved brand with a needed store: trusted house labels and warm memories generate goodwill, not traffic, once customers can buy the same goods more cheaply or conveniently elsewhere.
- Treat owned real estate as a strategic moat, not a piggy bank; a sale-leaseback turns a paid-off asset into a permanent rent bill and is a reliable early signal that an owner is harvesting the company rather than building it.
- Scrutinize any structure in which the controlling owner is also the largest lender and a major landlord — the roles can each be defended alone, but stacked they create a steady, lawful channel for value to leave the operating business as it shrinks.
- For lenders, regulators, and the towns that depend on an anchor store: when losses are funded by insider debt secured against the best assets, ask early who gets paid if the company fails — because the pension fund and the suppliers usually find out last.
References
- Sears, Roebuck and Company — History & Facts Britannica Money
- Sears files for bankruptcy, and Eddie Lampert steps down as CEO CNBC
- PBGC Statement on Sears Bankruptcy Filing Pension Benefit Guaranty Corporation
- Sears Holdings $175M settlement with Lampert has court approval Retail Dive
- Stanley Black & Decker reaches agreement to purchase Craftsman brand from Sears Holdings SEC / Stanley Black & Decker 8-K