Sears Holdings Reaches $175m Settlement With Lampert and Company

Highlights:

  • After nearly four years in bankruptcy, Sears Holdings and its one-time creditors said they have reached a settlement with its former CEO and majority owner, Eddie Lampert and other investors.
  • If approved by a federal bankruptcy judge, the settlement could resolve years-long litigation filed against Lampert and other defendants over allegations of asset stripping and “rank” self-dealing in the years leading to Sears Holdings’ 2018 bankruptcy.
  • The settlement would pay plaintiffs $175 million. Of that, $125.6 million would come from insurers, $41.9 million would come from the defendants and $7.5 million would come from shareholding funds.

Insights:

A decade ago, Sears Holdings was a sprawling retailer with thousands of stores under the Sears and Kmart brands, along with major property holdings and valuable owned brands. By the time it filed for bankruptcy, many of Sears Holdings’ stores had closed, major assets — including property, beloved products brands and retail banners such as Sears Canada — had been sold or spun off.

Those sales and spinoffs are the heart of the lawsuit against Lampert and other defendants. Lampert and his hedge fund, ESL Investments, invested and often took controlling stakes in many of the divested assets, including Sears Canada, Lands’ End and Seritage Growth Properties (which included a large portfolio of Sears Holdings’ real estate).

In their complaint, the plaintiffs alleged that “[a]ltogether, Lampert caused billions of dollars of cash and other assets to be transferred to himself, Sears Holdings’s other shareholders and other third parties.” 

Lampert and ESL were also on the receiving end of many Sears Holdings’ rent payments (after taking control Seritage), product purchases (via Lands’ End) and interest payments (through loans made to Sears Holdings’ while it made losses in its business).

Now, Sears Holdings is largely a paper entity that has been stuck in Chapter 11 purgatory for years, with the litigation against Lampert and other parties holding up final execution of its bankruptcy plan, approved long ago.

The remaining Sears and Kmarts were sold to Transformco — controlled by Lampert — in early 2019. Since then, most of those stores have closed, leaving just a handful of Kmarts and Sears Holdings department stores open in the U.S.

While the litigation has slogged on, creditors to Sears Holdings have been waiting to get paid something for what they floated to the company. That includes many of the retailer’s suppliers, who have awaited payment for products they shipped to the company years ago now in the weeks leading up to Sears Holdings’ bankruptcy and the months before selling its remaining stores to Transformco.

The time in Chapter 11, and the complexity of the Sears case, made it the most expensive retail bankruptcy of an era filled with them. And the mountain of legal and consulting fees owed by Sears Holdings have made it even harder for vendors to recover losses. With a settlement, an end to the legal saga of Sears’ bankruptcy may finally be in sight.

Source: Retail Drive

Walmart Acquires Omnichannel Tech Specialist Volt Systems

Highlights:

  • Walmart said it is acquiring Volt Systems, a software company focused on vendor management and product tracking.
  • With the acquisition, Walmart will take on Volt System’s talent, technology and customer agreements, the retailer said in a press release. Terms of the deal were not disclosed.
  • Walmart said that the deal “affirms Walmart’s continued investment in technology and innovation that enables us to better anticipate customer demand.”

Insights:

Over several years, Walmart has overhauled its digital strategy, moving from a focus on premium digital brands and experiences under former e-commerce head Marc Lore to building its digital capabilities around omnichannel shopping.

Omnichannel is where Walmart, with its store base covering most of the U.S.’ population, has an advantage over e-commerce behemoth Amazon. The pandemic only accelerated Walmart’s transition to an omnichannel specialist, with curbside and store pickup sales booming amid the long months of social distancing.

So, rather than splashy acquisitions — such as the massive deal for Jet.com, the website that Walmart would later shut down, and brands like Modcloth (which Walmart sold not long after buying) — Walmart has made quieter investments in its capabilities around omnichannel. 

Brett Biggs, Walmart’s chief financial officer, said at a conference in March that “the businesses that we continue to grow, whether … pick up, delivery, the work we’re doing in in-home, it’s all of these different ways that customers can shop with us.”  Biggs went on to explain that Walmart wants to be the first retailer customers think of when it comes time to shop. “[B]ecause they know whether I want to go pick up with my car, I want to go in the store, I want to shop at home, I can do all that with one company, and we think we’re giving the customer that today,” Biggs said, according to a Seeking Alpha transcript. 

The Volt Systems deal can be seen in that light. Volt brands itself as a solution for navigating “a complex omnichannel universe,” with its software services tied to omnichannel engagement, vendor management and product tracking. 

In its release announcing the deal, Walmart said that Volt “provides suppliers with enhanced on-demand visibility into merchandising resources,” and the tech company’s application “delivers current store-level data, actionable analytics, and shelf intelligence for suppliers to plan, forecast, and optimize product assortment.” All of that is aimed at creating a seamless shopping experience across channels and reducing friction from out-of-stocks, according to Walmart.

Volt represents another incremental investment in Walmart’s underlying operational capabilities around omnichannel. Walmart’s other recent investments include new augmented reality shopping tools for customers.

On the backend of its omnichannel operations, Walmart has partnered with Symbotic to bring the latter’s automated supply chain technology to all of its regional distribution centres. Walmart has also taken a stake in Symbotic. The retailer is also plotting new “next generation” fulfillment centres that use automated technology to streamline storage and retrieval of products.

At the store level, Walmart has created test stores to quickly test new omnichannel technologies and processes to speed up inventory movement to the sales floor and in-store pickup rates.

Source: Retail Drive

Ace Hardware to Open 60 Stores by the End of the Year

Highlights:

  • Continuing its brick-and-mortar expansion, Ace Hardware is opening 60 more stores by the end of the year and plans to open three new warehouses over the next five years, the hardware retailer announced on Wednesday. The company so far this year has opened 105 stores. 
  • The addition of the three warehouses will add 4.4 million square feet of capacity to its distribution network. Over the past four years, the hardware retail chain has added more than 2.5 million square feet of warehouse space for its distribution network.
  • The company currently operates more than 5,600 hardware stores across 70 countries, including the U.S. It has opened more than 840 stores over the past five years, per the press release.

Insights:

Ace Hardware’s decision to open more distribution facilities was driven by the need to keep up with the new stores it plans to open, according to the company. It has distribution capabilities in China, Panama and the United Arab Emirates, as well as the U.S.

“With over 100 new stores already opened for the year, we remain enthusiastically bullish about the continued prospect for new store growth,” Ace Hardware president and CEO John Venhuizen said in a statement. “I applaud our local Ace owners for the pace with which they’ve integrated our digital efforts with our physical assets. 70% of Acehardware.com orders are picked up in store and 20% are delivered to customers by our own red vested heroes, thus further advancing the relevance and necessity of our neighbourhood stores.”

Though Ace Hardware is expanding its physical presence, the company has recently made some cuts. After acquiring a majority stake in e-commerce curation retailer The Grommet in 2017, Ace Hardware shuttered the platform in June and laid off 44 employees. Jules Pieri, founder of The Grommet, announced its closure on LinkedIn.

Ace Hardware announced the rollout of new stores and distribution centres following a successful first quarter. Its Q1 2022 revenue rose 8.9% to $2.2 billion, and its net income saw a 13.7% bump to $119.8 million. At the time, the retailer reported increased sales across most of its departments, with its outdoor power equipment, plumbing, and lawn and garden categories seeing the most significant gains.

Source: Retail Drive