What Happened to Sears: From Retail Giant to Relic

At its peak, Sears accounted for 1% of the entire U.S. economy. Today, fewer than 10 stores remain open.

What happened to Sears is one of the most documented retail collapses in American business history. A company that once outsold every competitor, built iconic brands like Craftsman and Kenmore, and pioneered direct-to-consumer sales before the internet existed, filed for Chapter 11 bankruptcy in October 2018.

The decline took decades. It involved bad mergers, financial engineering, brand selloffs, and a failure to compete with Amazon and Walmart on any front that mattered.

This article covers the full story, from Sears Holdings Corporation’s peak revenue to the Kmart merger, Eddie Lampert’s decisions, the bankruptcy filing, and what other retailers can take from the collapse.

What Was Sears Before Its Decline?

Sears was the largest retailer in America for most of the 20th century. At its peak, Sears sales alone accounted for 1% of the entire U.S. economy, and two-thirds of Americans shopped there in any given quarter (Castus Global).

The company was founded in 1886 by Richard Warren Sears and Alvah Curtis Roebuck. It started as a mail-order catalog operation and grew into one of the most recognized American retail brands in history.

Sears held a peak store count of roughly 3,500 locations across the United States. It was removed from the Dow Jones Industrial Average in 1999, replaced by Home Depot, after holding a spot since 1924.

What Made Sears Dominant

Sears built its position through a combination of private label brands and financial services few retailers could match.

• Craftsman tools, Kenmore appliances, and DieHard batteries were exclusive to Sears stores
• Allstate Insurance was founded by Sears in 1931 and became a major profit driver
• Discover Card launched in 1985, giving Sears a financial services edge over pure-play retailers
• Coldwell Banker real estate services added another non-retail revenue stream

By 1931, in-store purchases had already surpassed catalog orders. Sears had built a physical retail operation that matched the scale of its original mail-order business.

The Sears catalog was arguably its most powerful asset before the shift to physical retail. It shipped complete house kits between 1908 and 1940, sold via mail order and assembled by buyers. That direct-to-consumer infrastructure predated Amazon by roughly nine decades.

Peak Revenue and Store Scale

Revenue at its height reached $53 billion in 2007 (CanvasBusinessModel), making Sears Holdings one of the largest retailers by revenue in the country after the Kmart merger.

That credit card business sold to Citigroup in 2003 had accounted for 60% of Sears’ profits at the time of sale. That single decision removed the company’s most profitable operation years before the retail collapse accelerated.

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When Did Sears Start to Decline?

Sears lost its position as America’s largest retailer in 1990, when Walmart reported sales of $32.6 billion against Sears’ $31.9 billion (CNBC via The US Sun). That was the first hard signal that the company’s core retail model was under structural pressure.

The decline didn’t happen in a straight line. It came in waves, each one cutting a little deeper than the last.

The 1990 Turning Point

Walmart’s rise wasn’t just a pricing story. It had redefined the lower-price goods market and expanded into rural areas where the Sears catalog had long been the dominant retail channel.

Sears posted a $3.9 billion loss in 1992. That same year, management began selling off subsidiaries to refocus on lagging retail operations (Britannica).

In 1993, Sears discontinued its general merchandise catalog. The catalog had generated $3.3 billion in sales the prior year but produced $175 million in losses due to inefficient operations (AOL/Motley Fool). The decision eliminated 50,000 jobs.

With hindsight, the timing was terrible. Amazon launched in 1994. Sears had already built the direct-to-consumer logistics infrastructure that took Amazon years to replicate, then shut it down the year before e-commerce began.

Early 2000s Decisions That Compounded the Problem

3 decisions between 2002 and 2005 weakened Sears before the Kmart merger even closed:

• 2002: Bought Lands’ End clothing retailer for $2 billion, a brand that didn’t fit the core store model
• 2003: Sold its Discover Card and credit business to Citigroup, removing the unit that generated 60% of profits
• 2005: Merged with Kmart, combining two struggling retailers under one holding company

Each move reduced Sears’ financial resilience. By the time the Kmart deal closed, the combined entity was already weaker than its parts.

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How Did the Kmart Merger Accelerate the Collapse?

The 2005 Kmart-Sears merger created Sears Holdings Corporation, briefly America’s third-largest retailer. It did not create a stronger business. It combined two companies that were both losing ground to Walmart and big-box specialists.

Eddie Lampert, then running ESL Investments, used his Kmart ownership stake to acquire Sears for $11 billion (24/7 Wall St). The logic was financial, not operational.

What the Merger Actually Produced

Analysts at the time flagged the deal’s structural problems. Two brands with overlapping merchandise, competing real estate footprints, and no unified customer identity were pushed under one roof.

Same-store sales at Kmart declined 4.4% and at Sears-branded stores by 10% in a single quarter as early as 2016 (Motley Fool). The combined entity never found a coherent retail strategy.

Key structural problems from the merger:

• No unified brand identity between Kmart and Sears customer bases
• Overlapping store locations created internal competition
• Capital that could have funded modernization went toward debt service
• Supplier confidence eroded as combined losses mounted

By the time the merger closed, Sears was already the 31st-largest retailer in the U.S. by 2018, down from number one decades earlier (Fandom/Pop Culture Wiki).

The Hedge Fund Model Applied to Retail

Lampert ran Sears Holdings with a financial engineering mindset. He reorganized the company into 30+ autonomous business units, each with its own management team and board, specifically to foster internal competition (American Prospect).

What works in investment portfolio theory does not translate to retail floors. Store employees needed to cooperate to serve customers. Instead, departments competed for internal resources.

The Week reported Sears produced $6 billion in stock buybacks under Lampert’s direction, cash that left the business instead of funding store improvements or technology.

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What Role Did Eddie Lampert Play in Sears’ Downfall?

Lampert became Sears Holdings chairman after the Kmart acquisition closed. He took over as CEO in 2013. His background was entirely in hedge fund management through ESL Investments, which had delivered annual returns of roughly 25% for investors before the Sears era (Britannica).

Running a retailer required different instincts. The decisions that followed reflected a financial asset management approach, not a retail operations one.

Asset Sales as a Survival Strategy

Lampert sold off Sears’ most valuable non-retail holdings across roughly a decade. Each sale provided short-term cash but removed long-term recovery options.

The Craftsman sale to Stanley Black & Decker closed in March 2017 for a net present value of approximately $900 million (Stanley Black & Decker press release). Sears had originally bought the Craftsman trademark in 1927 for $500.

After the sale, Sears found itself competing against a brand it once owned. Stanley relaunched Craftsman through other retail channels, including hardware stores and home improvement retailers that were already eating into Sears’ core categories.

The Autonomous Unit Experiment

Lampert installed 3 dozen separate management teams and boards inside Sears, one for each internal department, to drive competition between them (American Prospect). This organizational structure destroyed coordination across the company.

Clothing buyers couldn’t coordinate with appliance buyers. Auto center managers operated independently from general merchandise. The result was a fragmented operation that couldn’t execute a consistent customer experience across any store location.

ESL Investments and Lampert loaned nearly $2 billion to Sears in the two years before bankruptcy to keep the business operating (Yahoo Finance/CNN Money). That arrangement put Sears’ own largest shareholder in a creditor position, creating conflicts that later generated major litigation.

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How Did Amazon and Walmart Outpace Sears?

Sears held a stronger direct-to-consumer position than Amazon when Jeff Bezos launched in 1994. Sears had the logistics, the customer data, and the brand recognition. It chose not to build on any of it.

Amazon had a 69% share of online appliance sales by 2018, while Sears held just 1.6% of the same category (Payments Next). This in a category Sears had dominated for decades through Kenmore.

Where Walmart Won

Walmart’s supply chain investment created a pricing and availability advantage Sears couldn’t match. While Sears cut store maintenance budgets, Walmart modernized distribution centers and expanded into new merchandise categories.

Walmart reported its best U.S. sales growth in 10 years after acquiring Jet.com and building online grocery infrastructure (Cleo). Sears, during that same period, was closing stores and selling off brands.

Sears.com performance between January 2017 and September 2018:

• Website traffic down 16% year-over-year
• Transaction count grew only 0.03% over 21 months
• Online sales declined steadily after 2014 even as U.S. e-commerce grew ~15% annually
• Ranking dropped from #5 to #24 in Internet Retailer Top 500 (Digital Commerce 360)

ShopYourWay, Sears’ loyalty and e-commerce platform, accounted for 70% of sales at one point. But it didn’t drive top-line growth. It was a promotional tool, not a platform capable of competing with Amazon Prime.

Where Specialists Took the Rest

Home Depot and Lowe’s captured Sears’ hardware and appliance customer base through deeper product selection and installation services. Best Buy took electronics. AutoZone and Advance Auto Parts dismantled the auto supply business.

Sears had been strong in all of those categories. It lost each one to a focused competitor that invested in the category instead of extracting value from it.

Best Buy’s survival is worth noting here. It faced the same Amazon pressure as Sears in electronics. It responded by building Geek Squad, expanding installation services, and leaning into the one thing Amazon couldn’t offer: hands-on technical help. Sears never found an equivalent answer in appliances or tools.

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What Happened to Sears’ Real Estate and Brand Assets?

As retail revenue collapsed, Sears’ most valuable holdings shifted from merchandise to real estate and intellectual property. Lampert moved to monetize both, generating short-term cash at the cost of permanent structural assets.

Seritage Growth Properties

In 2015, Sears created Seritage Growth Properties, a real estate investment trust that acquired 505 Sears and Kmart locations. The transaction generated $2.7 billion for Sears Holdings.

Sears then leased many of those properties back from Seritage, creating ongoing rent obligations on stores it used to own outright. Warren Buffett personally invested in Seritage, though that backing didn’t stabilize the parent company.

The REIT structure gave Lampert’s ESL Investments a financial interest in the real estate while Sears absorbed the rent burden. Creditors later challenged this arrangement in court as part of post-bankruptcy litigation.

Brand Liquidation Sequence

The brand selloff followed a consistent pattern:

• Lands’ End (2014): Spun off as a public company. Sears had paid $1.2 billion for it in 2002
• Craftsman (2017): Sold to Stanley Black & Decker for $900 million. Brand founded in 1927, acquired for $500
• DieHard: Licensing arrangements post-bankruptcy; later sold to Advance Auto Parts for $200 million in 2019

Each brand sale removed a differentiating asset that had historically given customers a reason to shop at Sears specifically. Kenmore appliances were available only at Sears. Craftsman tools were exclusively Sears. Once those exclusives disappeared or weakened, Sears had no category where it was the only or best option.

Sears originally bought Craftsman in 1927 for $500. Stanley Black & Decker paid $900 million for it 90 years later, then immediately expanded it into Home Depot and Lowe’s. Those were the exact retailers already taking Sears’ hardware and appliance customers.

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What Were the Financial Numbers Behind the Collapse?

Sears revenue fell from $59 billion in the early 1990s to under $17 billion by 2017 (Yale Insights). That’s an 11-year consecutive revenue decline that no turnaround effort reversed.

At the time of the October 2018 bankruptcy filing, Sears listed $7 billion in assets against $11.3 billion in liabilities, with more than $5 billion in debt and annual interest obligations exceeding $440 million (Yale Insights).

The Losses Over Time

Sears recorded its last annual profit in 2010. From that point, losses accumulated without interruption.

Store Count Collapse

The store count decline is the clearest single indicator of how fast the Sears retail collapse accelerated.

• Peak store count: over 3,500 locations (combined Sears and Kmart)
• At bankruptcy filing, October 2018: approximately 700 locations still operating (The US Sun)
• As of June 2025: 8 stores remaining in the U.S. (1440)

Same-store sales fell 7.4% in 2016 alone (Accounting Insights). Comparable store sales at Sears-branded locations dropped 10% in a single quarter in 2016 (Motley Fool), while Kmart fell 4.4% in the same period. Neither chain recovered.

What the Debt Load Meant Operationally

With $440 million in annual interest payments, Sears had no financial room to invest in store renovations, technology, or supply chain improvements. The debt wasn’t just a balance sheet problem. It was the reason stores became run-down, why advertising spend dropped, and why no credible e-commerce build ever happened.

Target and Walmart were spending heavily on store redesigns and online infrastructure during the same years Sears was paying creditors and closing locations. The gap between Sears and its competitors widened every year that capital went to debt service instead of retail investment.

By the time Sears filed for failed business status in Chapter 11 on October 15, 2018, 200 suppliers had already refused to ship merchandise to stores out of fear they wouldn’t be paid (Yale Insights). The operational collapse had preceded the legal one.

Why Did Sears File for Bankruptcy in 2018?

Sears Holdings filed for Chapter 11 bankruptcy protection on October 15, 2018, in the U.S. Bankruptcy Court for the Southern District of New York. The filing date was not coincidental. A $134 million debt payment was due that exact day (Wikipedia/Transformco).

The company entered bankruptcy with 687 stores still operating (Fox Business). It had closed roughly 300 stores in 2018 alone before filing.

What Triggered the Filing

Revenue had fallen to $16.7 billion in the final fiscal year before filing, down from over $50 billion a decade earlier (CBC). The company had posted losses in 15 of the previous 16 quarters (Motley Fool).

Immediate pressures at filing:

• $134 million debt payment due, unpayable
• 200 suppliers already refusing to ship merchandise (Yale Insights)
• $508 million net loss in Q2 2018 alone (Retail Dive)
• $11.3 billion in total liabilities against $7 billion in assets

The filing covered Sears Holdings and its subsidiaries. On the same day, the company announced closure of 142 stores, including 63 Kmart locations and 79 Sears-branded stores (Transformco/Wikipedia).

The Liquidation vs. Rescue Debate

The unsecured creditors committee immediately pushed for full liquidation. Their argument: Lampert should not profit from a bankruptcy he had, in their view, contributed to through years of asset transfers (Retail Dive).

Lampert countered with a $5.2 billion going-concern bid through Transform Holdco LLC, an ESL affiliate. The bid was designed to keep 425 stores open and preserve roughly 45,000 jobs (HG Experts).

U.S. Bankruptcy Judge Robert Drain approved the ESL bid in early February 2019, overriding creditor objections. Transform Holdco finalized the acquisition on February 11, 2019 (Retail Dive). Stores not included in the deal were immediately liquidated.

What Did Lampert’s Buyout Actually Save?

Transform Holdco acquired 223 Sears stores and 202 Kmart stores in February 2019. The combined operation opened under the informal name “new Sears” with a cleaner balance sheet but the same fundamental retail challenges.

The store count did not hold. Transformco closed stores steadily throughout 2019 and 2020. By June 2025, only 8 Sears stores remained in the U.S. (1440). Five were reported open as of December 2025 (Wikipedia/Sears).

What the Creditors Got

Creditors filed a major lawsuit against Lampert in April 2019, seeking $2 billion based on pre-bankruptcy asset transfers including Lands’ End, the Seritage real estate deal, and interest payments to ESL totaling more than $400 million between 2016 and 2018 (Yahoo Finance/Sourcing Journal).

The case settled in August 2022 for $175 million, court-approved by Judge Drain. That settlement closed out Sears Holdings’ Chapter 11 case after four years (Bloomberg Law).

What Remained of the Brands

DieHard was sold to Advance Auto Parts for $200 million in 2019. Kenmore licensing arrangements continued under Transformco. Craftsman had already left the portfolio in 2017.

Transformco shifted its focus almost entirely to real estate management and asset liquidation after 2019. The retail business had no credible path to recovery at the scale acquired.

The litigation outcome is notable. Creditors sought $2 billion, accepted $175 million, and received 8.75 cents on the dollar for claims alleging years of deliberate asset stripping. That gap tells you what courts found provable versus what creditors believed happened.

What Happened to Sears Employees and Pension Holders?

At the time of the bankruptcy filing, Sears Holdings had approximately 68,000 active employees. The two pension plans covered 90,000 workers and retirees across Sears, Roebuck and Co. and Kmart Corporation (PBGC).

The pension plans were underfunded by approximately $1.5 billion at the time of filing, funded at only 64% of their obligations (PBGC statement via International Business Times).

How the PBGC Stepped In

The Pension Benefit Guaranty Corporation had been monitoring Sears’ pension funding for years before the bankruptcy. It became the largest unsecured creditor at filing.

PBGC and Sears agreed, with bankruptcy court approval, to terminate both pension plans as of January 31, 2019. On February 11, 2019, PBGC formally assumed trustee responsibility for both plans (PBGC official Q&A).

PBGC stated it expected to cover the “vast majority” of earned pension benefits. Kmart “90 point” retirement benefits earned after the October 15, 2018 filing date may not be fully covered under PBGC guarantee rules (HG Experts).

Severance and Job Loss

Workers laid off before the bankruptcy filing had severance payments cut off on the same day Sears filed. Employees who had already left and were receiving severance were informed their payments were stopping immediately (CBC Canada).

Job losses across the full collapse timeline exceeded 90,000 positions when combining pre-bankruptcy store closures with the liquidation of stores not acquired by Transformco.

WARN Act violation lawsuits were filed by workers who alleged insufficient notice before mass layoffs. These claims joined the pile of unsecured creditor obligations in the bankruptcy proceedings.

What Can Other Retailers Learn from Sears?

Sears is now a case study taught in business schools. The lessons aren’t abstract. Each failure point maps directly to a documented decision with a documented outcome.

Best Buy faced comparable existential pressure from Amazon in electronics around 2012. It responded by investing in in-store experience, Geek Squad expansion, and vendor partnerships with Apple and Samsung. Best Buy’s comparable sales grew every year from 2015 onward, and the company cut its debt in half while Sears piled debt on (The Week).

The Core Failure: Retail Treated as a Financial Instrument

Lampert’s hedge fund background shaped every major decision at Sears Holdings. Share buybacks, asset sales, and internal unit competition all came from financial engineering logic applied to a business that needed operational investment.

What that model produced:

• $6 billion in buybacks instead of store modernization
• 30+ autonomous units that competed instead of cooperated
• Real estate sold and leased back, creating rent obligations on stores Sears used to own

Unlike Sears, Best Buy kept debt manageable and invested in the in-store service experience that online retailers couldn’t replicate. Geek Squad represented 5% of Best Buy’s revenue in 2018 and was a direct answer to the question Amazon couldn’t answer: hands-on, in-home technical help (Emmanuel Obadia).

The Catalog Exit Lesson

Sears discontinued its direct-to-consumer catalog in 1993, one year before Amazon launched. The infrastructure it shut down, including distribution, customer databases, and direct mail operations, was exactly what Amazon spent the next decade building from scratch.

The catalog generated $3.3 billion in sales in its final year but lost $175 million due to operational inefficiency (AOL). That was a fixable problem. Exiting the model entirely was not reversible.

Any retailer today sitting on a proprietary data asset or direct customer channel should look at that decision carefully. The question isn’t whether the current format is profitable. It’s whether the underlying capability has a future.

Brand Exclusivity as a Moat

Kenmore, Craftsman, and DieHard gave customers a reason to shop at Sears and nowhere else. Once Craftsman went to Stanley Black & Decker and immediately appeared on Home Depot shelves, that exclusivity was permanently gone.

Target differentiated through design and store experience instead of trying to out-price Walmart. It maintained a distinct customer identity. Sears had no equivalent pivot. Its brand identity was “everything for everyone,” which became meaningless when specialists took each category.

The Sears story connects directly to how Circuit City and Blockbuster collapsed under the same pattern: an incumbent with real advantages that chose financial extraction over operational investment, and lost categories one by one to focused competitors who had nothing else to protect.

FAQ on What Happened to Sears

Why did Sears go bankrupt?

Sears Holdings Corporation filed for Chapter 11 bankruptcy on October 15, 2018, unable to meet a $134 million debt payment. Years of declining revenue, $6.26 billion in cumulative losses since 2010, and a debt load exceeding $5 billion made the filing unavoidable.

When did Sears start to decline?

The decline began in 1990 when Walmart surpassed Sears as the largest U.S. retailer. The 1993 catalog discontinuation, the 2003 sale of its credit card business, and the 2005 Kmart merger each accelerated the deterioration.

What did Eddie Lampert do to Sears?

Lampert, running ESL Investments, reorganized Sears into 30+ competing internal units and directed $6 billion in stock buybacks instead of store investment. He also sold Craftsman, Lands’ End, and key real estate assets to generate short-term cash.

How many Sears stores are left?

As of June 2025, 8 Sears stores remained open in the United States, operated by Transformco. This is down from roughly 3,500 combined Sears and Kmart locations at peak and 687 stores at the October 2018 bankruptcy filing.

What happened to the Craftsman brand?

Sears sold Craftsman to Stanley Black and Decker in 2017 for $900 million. Stanley immediately expanded distribution into Home Depot and Lowe’s, putting Craftsman tools directly on shelves of the competitors already taking Sears’ hardware customers.

What happened to the Sears pension plans?

The Pension Benefit Guaranty Corporation assumed responsibility for both Sears pension plans on February 11, 2019. The plans covered 90,000 workers and retirees and carried a $1.5 billion funding shortfall at the time of the bankruptcy filing.

Did Sears survive bankruptcy?

Technically yes. Eddie Lampert’s Transform Holdco LLC acquired 425 stores for $5.2 billion in February 2019. But Transformco continued closing locations steadily. The surviving operation is a fraction of its former scale, focused mainly on real estate management.

What happened to the Sears catalog?

Sears discontinued its general merchandise catalog in 1993, eliminating 50,000 jobs. The catalog had generated $3.3 billion in sales but lost $175 million due to operational costs. Amazon launched the following year, making the exit one of retail’s most consequential timing errors.

How did Amazon and Walmart contribute to Sears’ collapse?

Amazon captured 69% of online appliance sales by 2018, leaving Sears with just 1.6% in a category it had dominated for decades. Walmart’s supply chain investment and pricing strategy pulled customers from every merchandise category Sears competed in.

What happened to the Sears lawsuit against Eddie Lampert?

Creditors filed suit in 2019 seeking $2 billion over pre-bankruptcy asset transfers including Seritage, Lands’ End, and ESL loan payments. The case settled in August 2022 for $175 million, court-approved by Judge Robert Drain, closing out the four-year Chapter 11 proceedings.

Conclusion

This conclusion is for an article presenting the full arc of Sears Holdings Corporation’s collapse, from retail dominance to a company operating fewer stores than most small towns have coffee shops.

The Sears bankruptcy filing wasn’t a surprise to anyone watching the numbers. It was the result of bad capital allocation, failed mergers, brand liquidation, and a leadership model that treated a retailer like a hedge fund portfolio.

Kenmore, DieHard, and Seritage Growth Properties are what remain of a company that once defined American retail. The store count decline from 3,500 locations to single digits is the clearest measure of how completely the business collapsed.

The lessons are documented and specific. Operational investment beats financial engineering in retail, every time.

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Bogdan Sandu

Bogdan Sandu specializes in web design, focusing on creating user-friendly websites, and innovative UI kits.

Many of his resources are available on various design marketplaces and for free on Codepen.

Over the years, he's worked with a range of clients and contributed to design publications like Design Your Way, Designmodo, WebDesignerDepot, WPDean, Speckyboy, and Slider Revolution among others.

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