trending Market Intelligence /marketintelligence/en/news-insights/trending/qb1qAUb8T93Z4rdUIvYUjQ2 content esgSubNav
In This List

In liquidation, Sears assets could lure bids from other retailers

Case Study

An Investment Bank Taps S&P's Real Estate Modeling Expertise


FIMA EUROPE 2023: Exploring the Intersection of Data, Governance, and Future Trends in Finance


Private Markets 360° | Episode 8: Powering the Global Private Markets (with Adam Kansler of S&P Global Market Intelligence)


Infographic: The Big Picture 2024 – Energy Transition Outlook

In liquidation, Sears assets could lure bids from other retailers

Sears Holdings Corp. may have avoided liquidation for now, but multiple assets ranging from its stores to some of its own brands could be attractive purchases for other retailers if the company eventually ends operations.

A bankruptcy court judge will allow the Hoffman Estates, Ill.-based retailer to consider a revised bid from ESL Investments Inc. Chairman and CEO Edward Lampert, according to Jan. 8 news reports. Lampert has until 4 p.m. on Jan. 9 to submit a revised proposal, which will follow an earlier failed bid worth $4.4 billion. Sears did not respond to requests for comment from S&P Global Market Intelligence.

As of Dec. 13, 2018, some of the most valuable assets Sears held included its merchandise on hand, worth about $2.32 billion, according to an SEC filing. Property and equipment such as point-of-sale systems carry a value of about $1.50 billion, while trade names, which include brands such as Kenmore and DieHard, were valued at $861 million.

SNL Image

Among the assets that could prove most attractive to buyers are some of the Sears-owned brands, David Berliner, a restructuring and turnaround services partner at BDO, said in an interview. The retailer still owns the Kenmore appliance label as well as DieHard, under which it sells car batteries.

Other retailers could covet the brands for their reputation within specific consumer goods categories, Berliner said. Other store chains that sell appliances, for example Home Depot Inc., could be interested in attracting former Sears customers since those sales may provide an edge over rivals.

"They can say, 'Anyone who wants Kenmore is going to come to me,' " Berliner said.

A liquidation of Sears will also make available hundreds of large commercial real estate properties, though landlords could face challenges filling the space with other retailers, Edward Jones analyst Brian Yarbrough said in an interview.

Many retailers that are expanding their store networks do not need such large spaces, Yarbrough said. At the same time, Sears' liquidation would add to the existing glut of retail space in the U.S., he added.

"There's still too much square footage out there," Yarbrough said.

After a Sears liquidation, landlords could be tempted instead to divide Sears stores into spaces for multiple retailers, said BDO's Berliner, who advised creditors to the now-defunct The Sports Authority Inc. on the retailer's bankruptcy. After the Colorado-based company's 2016 bankruptcy and liquidation, many landlords carved out spots formerly occupied by the sporting goods retailer into multiple storefronts, according to local press reports in various markets.

For retailers, taking over store space from Sears could be attractive if the rent rate in the company's lease is below the market rate for an area, Berliner said. If a retailer can secure a Sears lease with years left, the savings "can add up to some real money," Berliner added.