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Sears Bankruptcy Will Have Varied Impacts on Others

Law Office of Ronald V. De Caprio Oct. 25, 2018

By now, the news of the bankruptcy filing by Sears is well known. Many Sears stores will close, and many employees will lose their jobs. But, what about firms that sell goods and services to Sears or rent space to Sears? Preliminary analyses of the retail market appear to show that some firms will benefit from the Sears bankruptcy and others will be harmed. The extent of both harmful and beneficial effects cannot yet be measured with fine accuracy, but preliminary studies of Sears’ situations provide a few informative hints.

Sears suppliers have been taking self-protective steps for several months. Many suppliers who are worried about Sears paying for their products have tightened payment terms or have refused to sell to Sears. At least one firm that provides insurance and cash advances to Sears suppliers has stopped offering any type of insurance. About 200 suppliers have simply stopped selling merchandise to Sears. Nevertheless, some very large vendors, such as Frigidaire, Samsung and Whirlpool, will have claims against the bankruptcy estate between $5 and $23 million.

Surprisingly, mall owners that have rented to Sears are seeing the bankruptcy as a positive event. Those malls and shopping centers that were suffering because of Sears’ declining business will have the opportunity to rent to more profitable customers. Also, landlords were having difficulty renting space near the Sears location. That problem may largely disappear.

The only group that may not see any bright side to the Sears bankruptcy are its employees. In its prime, Sears had 350,000 employees. In the last year, the workforce shrank from 90,000 to 68,000, and further reductions are expected. Sears has not yet announced its final plans for dealing with its workforce.

Any business that has dealt with Sears and may have a claim against the company may want to get more information about their bankruptcy options.