“‘Vanity of vanities,” saith the Preacher, “vanity of vanities; all is vanity.'”
There are many great American business success stories–and the rise of Sears, Roebuck and Company is one of the more compelling tales.
The last few pages of the book on Sears are blank–and the ending is not going to be a happy one.
Richard Sears, like many entrepreneurs, started small. The Minnesota railroad station agent first sold watches to other rail agents in 1886. After moving his business to Chicago and partnering with watch repairer Alvah Curtis Roebuck in the 1890s, the company created the legendary Sears catalog, where one could buy the 19th century version of everything. Because Richard grew up on a farm, he picked items for the catalog that he knew would appeal to farmers and small-town Americans.
In 1908, Sears created the build-it-yourself house kit–over 70,000 Sears homes were constructed. In 1925, Sears opened department stores and after World War II it successfully rode the wave of suburbanization that crosstown rival Montgomery Ward missed.
But rural America, which was once Sear’s base market, didn’t vanish–and it was in the countryside where Walmart founded in 1962. By 1990, Walmart surpassed Sears as America’s largest retailer, and the onetime behemoth has been struggling ever since. Kmart, another troubled retailer, merged with Sears ten years ago–creating Sears Holdings. The union was similar to a marriage between members of two cash-poor aristocratic families whose chief asset was their names.
Last week Fitch downgraded Sears bond-rating to Double-C, which according to Michael Aneiro of Barron’s, is “essentially the sub-basement of the speculative-grade ratings scale.”
Crain’s Chicago Business’ Joe Cahill speculates that the debt load could put the “closed” sign forever on Sears and its family of stores by 2016.
Three years ago, after threatening to move its headquarters out of Illinois, the state legislature gave $150 million in tax breaks to Sears Holdings so it would stay in the Prairie State.
What a waste of money that was.
John Ruberry, a fifth-generation Chicago-area resident, regularly blogs at Marathon Pundit.