Sears Hometown files for bankruptcy amid accumulated $100M in liabilities

Sears Hometown Stores Inc. is in financial trouble again and filed for bankruptcy recently. It is now struggling, just like its parent company.

It was in 2012 when Sears spun off Sears Hometown to generate cash and give it to the parent company that really needed it. The company was reacquired by Transformco when it went bankrupt in 2019, but it apparently failed to recover.

Sears Hometown is an American retail company that mainly sells home appliances, lawn and garden equipment, and tools. As per CNN Business, the typical store measures 8,000 to 10,000 square feet, and this is just a very tiny fraction of the average Sears store in terms of size. A full outlet is around 160,000 square feet.

Three years ago, the retail chain operated about 700 outlets, but the number of outlets is now down to 100. From the given count, the full-sized stores are down to 15 locations, and in its bankruptcy filing in Delaware, the company listed its subsidiary’s assets as less than $50 million but has liabilities of $50 to $100 million.

Sears Hometown is 37.75% owned by Eddie Lampert who is also the chief executive officer of Transformco, Sears’ holding company. However, the bankrupt retailer never stopped depending on Sears Holdings for almost every aspect of the business, and in fact, most of its merchandise, ad support, and logistics were provided by the parent company.

Neil Saunders, GlobalData Retail’s managing director, said that Sears Hometown was very promising at first and even viewed as having better prospects compared to the main Sears chain. This is because the spinoff is dedicated to selling home products, plus its smaller store size has been described as “more optimal than the huge department stores.” However, Saunders said that Sears Hometown wasted its good potential under its parent, Transformco.

“Instead, it has followed the similar pattern of continual decline that has been the hallmark of Sears, with hundreds of stores closing earlier this year,” he said. “The benefits of having access to unique merchandise via exclusive products have also been lost as the various brands Sears once owned have been sold off and are now distributed more widely across retail. Bankruptcy will allow various assets to be sold off and will likely give Transformco flexibility in deciding how to distribute its remaining brands and services.”

Finally, Bloomberg reported that after filing for Chapter 11 bankruptcy protection, Sears Hometown would continue to operate and work on a plan to pay back its creditors.

Photo by: MikeKalasnik/Flickr (CC BY-SA 2.0)