Once mighty US retailer Sears files for bankruptcy

Sears has closed hundreds of outlets in recent years amid increasing prominence of online shopping. (File/AP)
Updated 15 October 2018
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Once mighty US retailer Sears files for bankruptcy

  • Sears had been drowning in debt and reportedly could not afford a $134 million repayment
  • Started in 1886, the company was a pioneer of departmental stores that catered to everyone

WASHINGTON: Sears, an anchor of retail life for generations of Americans, filed for bankruptcy on Monday and said it was closing almost 150 stores, the latest marquee victim of the online era.
Founded in 1886 as a mail order catalog company, it went on to pioneer the department store industry, selling all things to all people, and by the mid-20th century had built a vast empire that stretched across North America.
But in recent decades the company struggled in a quickly shifting retail environment, battered by competition from big-box stores and then by the meteoric rise of Amazon and other e-commerce players.
Sears Holdings Corporation, also the parent company for Kmart, which merged with Sears in 2005, said in a statement it had filed for bankruptcy protection in Manhattan.
The company been drowning in debt exceeding $5 billion and reportedly could not make a $134 million payment that had been due on Monday.
S&P Global Ratings on Monday downgraded the company’s debt to ‘D,’ calling the company’s capital structure “unsustainable.” Meanwhile shares in the company had plunged 24 percent just before 1500 GMT.
Edward Lampert, chairman of Sears Holdings, said the insolvency filing would give the company the “flexibility to strengthen its balance sheet” and enable it to accelerate a strategic transformation.
Sears said it intended to reorganize around a smaller store platform, a strategy it said would help save tens of thousands of jobs.
But outside the company, its insolvency was greeted as an ignominious shipwreck.
“Today is a day that will live in retail infamy,” Neil Saunders, managing director at GlobalData Retail, said in a statement.
“That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure.”
Saunders said company leadership had failed to change with the times and that its future was very much in doubt.
“In our view, too much rot has set in at Sears to make it viable business,” he said.
“The brand is now tarnished just as the economics of its model are firmly stacked against its future success.”
Sears Holdings had 89,000 employees as of February, according to a filing with the Securities and Exchange Commission — down from almost 350,000 a decade ago — as well as 547 Sears and 432 Kmart stores.
It announced Monday it would close 142 unprofitable stores near the end of the year, in addition to the previously announced closure of 46 stores by November.
While retaining his chairmanship, Lampert will step down as CEO, with the role handled by other senior executives as part of a new “Office of the CEO.”
Sears added it had received commitments for $300 million in debtor-in-possession financing and was negotiating for an additional $300 million.
Jerry Hancock, a self-described Sears scholar and historian, told NPR the outlet was an “American institution.”
“For the older generation, it’s the changing of the times. Sears was just such an integral part of their childhood, building that American family.”
In the 1890s, the Sears catalog “completely changed American life,” said Hancock, offering consumers exotic items they had seen at the World’s Fair or had read about, like cream separators and Singer sewing machines.
Sears is far from the only iconic retailer to fall by the wayside as more consumers switch to shopping online.
In March, Toys R Us announced it was shuttering all of its US stores while other big names such as Macy’s and JC Penney have also been forced to close numerous locations and lay off workers.
American shopping malls in turn have pivoted toward a new generation of stores, food and entertainment, including players that began online before graduating to bricks and mortar.
Other additions include trendy gym chains, and Dave & Buster’s, whose video game and pro-sports viewing restaurants are emblematic of the “experiences, not stuff” mantra now resonant among consumers.


Huawei founder says company would not share user secrets

Updated 16 January 2019
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Huawei founder says company would not share user secrets

  • The statement was a response to accusations Huawei is controlled by the ruling Communist Party or is required to facilitate Chinese spying
  • He said the security concerns have yet to have a significant effect on Huawei’s business

SHENZHEN, China: The founder of China’s Huawei, the world’s biggest supplier of network gear to phone and Internet companies, says his company would not share secrets about its customers and their communication networks.
Ren Zhengfei spoke in a rare meeting with foreign reporters as Huawei Technologies Ltd. tries to protect its access to global telecom carriers that are investing heavily in next-generation technology.
His comments were the 74-year-old former military engineer’s most direct public response to accusations his company is controlled by the ruling Communist Party or is required to facilitate Chinese spying.
Huawei is China’s first global tech brand. The United States, Australia, Japan and some other governments have imposed curbs on use of its technology over such concerns.
“We would definitely say no to such a request,” said Ren when asked how the company would respond to a government demand for confidential information about a foreign buyer of its telecom technology.
Ren said neither he nor the company have ever received a government request for “improper information” about anyone.
Asked whether Huawei would challenge such an order in court, Ren chuckled and said it would be up to Chinese authorities to “file litigation.”
Huawei is facing heightened scrutiny as phone carriers prepare to roll out fifth-generation technology in which Huawei is a leading competitor. 5G is designed to support a vast expansion of networks to serve medical devices, self-driving cars and other technology. That increases the cost of potential security failures and has prompted governments increasingly to treat telecoms communications networks as strategic assets.
The company’s image suffered a new blow last week when Polish authorities announced one of its Chinese employees was arrested on spying charges. Huawei announced it fired the employee and said the allegations had nothing to do with the company.
Ren is the father of Huawei’s chief financial officer, Meng Wanzhou, who was arrested Dec. 1 in Canada on US charges related to possible violations of trade sanctions on Iran.
Ren said he couldn’t discuss Meng’s case while it still was before a court. But he said Huawei obeys the law, including export restrictions, wherever it operates.
Ren expressed gratitude to Canadian justice officials for their treatment of Meng, who was released on bail and is staying in a house in Vancouver. He also expressed thanks to her fellow jail inmates prior to her release “for treating her kindly.”
“After all the evidence is made public, we will rely on the justice system,” he said. “We are sure there will be a just conclusion to this matter.
Two Canadians were arrested by Chinese authorities on national security charges, prompting suggestions abroad they might be hostages to secure Meng’s release. On Monday, a Chinese court announced another Canadian had been sentenced to death in a drug case after he was ordered retried.
Asked how he felt that Huawei was linked to accusations Beijing took hostages, Ren said he saw no connection between the Canadians and Meng’s case.
Dressed in a blue sport coat and an open-necked light blue shirt, Ren was jovial and animated during the two hour and 20 minute meeting.
Ren said he became a Communist Party member in the early 1980s after the state press published reports about his development of a measuring tool for an engineering project. Earlier, he couldn’t join because his father was deemed a “capitalist roader,” but the party was trying to promote young, technologically capable people after the violent, ultra-radical Cultural Revolution in 1976.
Ren founded Huawei in 1987 to sell imported telecom switching gear to Chinese phone companies after the PLA disbanded his engineering unit, according to the company.
Despite his party membership, Huawei makes decisions based on its customers’ needs, Ren said.
“I don’t see a close connection between my personal political beliefs and our commercial decisions,” he said.
Huawei’s US market evaporated in 2012 after a congressional panel said the company and its smaller Chinese rival, ZTE Corp., were security risks and urged phone companies to avoid them.
But Huawei passed Sweden’s LM Ericsson to become the biggest supplier of network gear and its smartphone brand displaced Apple Inc. last year as the No. 2 global seller behind Samsung.
The company forecasts last year’s revenue will exceed $100 billion for the first time. Ren said this year’s target is $125 billion.
Huawei says it is employee-owned. Ren said no government entity or any other investor who isn’t a current or former employee owns “one cent of Huawei shares.”
Ren said Huawei has no research cooperation with China’s People’s Liberation Army and no dedicated unit for military sales and he knew of no PLA purchases of civilian technology.
Ren said the security concerns have yet to have a significant effect on Huawei’s business. The company has signed 5G contracts with 30 carriers and has shipped 25,000 base stations, he said.
Huawei has plenty of opportunities even if it faces higher barriers in some markets, he said.
“If we are not allowed to sell in certain markets, we will have a smaller operation,” he said. “So long as we can feed our employees, we are satisfied.”
Ren defended Huawei’s decision to remain privately held — a status that has fueled questions about its intentions and who controls it. He said that helped to preserve its long-term focus on customer service and product development.
Publicly owned companies care more about a “beautiful balance sheet” while Huawei is focused on a “strong industry structure,” he said.
“Capital tends to be greedy.”
Ren also warned against allowing security concerns to divide the globe into isolated markets with incompatible technology standards — a scenario some people have suggested might result from US-Chinese tensions.
“Arbitrarily dividing the world into two technology camps can only harm the interests of all society,” he said.
Asked about President Donald Trump’s suggestion on Twitter that he might intervene in Meng’s case if that facilitated a resolution of Washington’s tariff battle with Beijing, Ren said he would wait to see whether Trump takes action.
“As for President Trump as president, I still believe he is a great president,” Ren said. He said Trump was elected to cut taxes, which he believed was beneficial for American industry.
However, he said, “If companies are getting frightened by the detention of certain individuals, then investors might be scared away, and that is not in the interests of the United States.”
Ren said he didn’t believe Huawei would face US penalties similar to those that nearly drove smaller Chinese rival ZTE Corp. out of business. Washington barred ZTE from buying American technology over its exports to Iran and North Korea but restored access after the company paid a $1 billion fine, replaced its executive team and installed US-selected compliance monitors.
“What happened to ZTE, I don’t believe will happen to Huawei,” said Ren. However, he said, “if it did happen to Huawei, I don’t believe the impact would be very significant. I believe telecom operators would continue to trust Huawei.”
Ren said Huawei doesn’t want Beijing to retaliate for foreign restrictions by hampering market access for Apple Inc. and other rivals.
“In spite of setbacks in some countries, we are still supportive of China becoming a more open country.”