Volume 21, Issue 2 Fall, 2018

OCTOBER 15, 2018—THE DAY OF RECKONING FINALLY ARRIVED FOR HOLDINGS

Sears Holdings ber, and it faces has defied pre- potential liens if dictions of its it can’t pay logis- bankruptcy for tics companies years. But after owed million of much specula- dollars in the tion and rumors, coming weeks. the company on The company’s October 15, fac- lenders have ing a $134 million agreed to provide debt payment, $300 million in announced a se- bankruptcy fi- ries of actions nancing and to reposition the Edward Lampert company and re- is in discus- vive its fortunes. Store Closings sions to provide Among these actions included the another $300 million to keep would be able to revise its decade- filing of debt relief under Chapter 11 the company in business long decline. of the Bankruptcy Code in the U.S. through the holiday season. Bankruptcy Court for the Southern “Will Sears be relegated to the continued on page 2 District of New York. The company dustbin of history, and will 68,000 will also close an additional 142 Americans lose their jobs, or will This issue of STRAIGHT TALK: unprofitable stores near the end of Sears enter the next chapter of its Sears Day of Reckoning p. 1 the year bringing the total number life as an iconic American com- Two New Sears Directors p. 4 of Sears and stores down to pany,” wrote Robert A. Riecker, the Sears Letter to Retirees p. 5 around 500. company’s chief financial officer, in Survive After Bankruptcy? p. 6 bankruptcy court filings. Bankrupt, Not Closed p. 7 The Chapter 11 filing doesn’t mean Atlanta Big Club Photo p. 7 the end of Sears, but it marks yet Sears further said in court papers it How Kohl’s is Succeeding p. 8 another bad sign for the 125-year- faces “catastrophic consequences” Sec. Mnuchin & the PBGC p. 9 old company that was once a giant if it can’t repair its unraveling sup- Good News For Retirees p. 9 of American . But Sears ar- ply chain. Some 200 vendors have Vern Vikingson Obituary p. 10 Edward Lampert Interview p. 11 gued in its bankruptcy filing that stopped shipping goods to its stores N.A.R.S.E. Needs You! p. 11 given enough time and less debt, it during the first two weeks in Octo- What Whirlpool Wants! p. 12

—STRAIGHT TALK Fall 2018— 1 Reckoning continued from page 1 around professional with a track while others did not, and there were “It’s an American tragedy and it record of revitalizing companies external factors that have severely need not have happened,” said experiencing financial, operational hurt the company … I invested so Arthur Martinez, who was CEO of or strategic transitions to maximize much of my time and money in the Sears from 1995 to 2000. value for stakeholders. company because I believe Sears has a future.” And President Trump said that the Mr. Meghji has joined the com- company “has been dying for many pany’s senior management team “The Chapter 11 process will give years.” He blamed Sears’s decline on and will help lead the company’s Holdings the flexibility to strength- poor management, saying the company restructuring efforts, reporting to en its balance sheet, enabling the was “improperly run for many years.” the Restructuring Committee. company to accelerate its strategic transformation, continue right Sears Reorganization Team Chairman Lampert’s Comments sizing its operating model, and re- Along with the actions taken on “Over the last several years, we turn to profitability. Our goal is to October 15, Eddy Lampert has have worked hard to transform our achieve a comprehensive restruc- stepped down from his role as chief business and unlock the value of turing as efficiently as possible, executive officer of the company. He our assets,” said Edward Lampert. working closely with our creditors will remain chairman of the board. “While we have made progress, the and other debt holders, and be The company’s board better positioned to exe- created an Office of the cute on our strategy and CEO, which will be re- key priorities,” he said. sponsible for managing the company’s day-to- Chairman Lampert add- day operations during ed: “As we look toward the bankruptcy process. the holiday season, Sears and Kmart stores remain The Office of the CEO open for business, and will be composed of Rob- our dedicated associates ert A. Riecker, chief look forward to serving financial officer; Leena our members and cus- Munjal, chief digital offi- tomers. We thank our cer, customer experience vendors for their con- and integrated retail; and tinuing support through Gregory Ladley, president the upcoming season of apparel and footwear. and beyond. We also

The Sears Board also Minh Uong/ thank our associates for formed a special committee that plan has yet to deliver the results their hard work and commitment will oversee the restructuring pro- we have desired, and addressing to providing millions of Americans cess and have decision-making the company’s immediate liquidity with value and convenience.” authority with respect to transac- needs has impacted our efforts to Mr. Lampert is still betting on tions involving affiliated parties. become a profitable and more com- Sears. At an employee gathering The Restructuring Committee petitive retailer.” at Sears’s headquarters after the consists solely of independent “Everything I have done as an in- bankruptcy was announced, he told directors and includes Alan J. vestor to has been employees, “I don’t view today as a Carr, Paul G. DePodesta, Ann N. with the goal of helping the com- funeral, but as a new beginning.” Reese and William L. Transier. pany and its people succeed,” Mr. N.A.R.S.E. Chairman’s Comments Additionally, Mohsin Y. Meghji, Lampert said in a statement when Ron Olbrysh, chairman of the Na- managing partner of M-III Part- he resigned as CEO. tional Association of Retired Sears ners, has been appointed chief “We choose transformational rather Employees continued on page 3 restructuring officer. Meghji is a than traditional strategies,” he nationally recognized U.S. turn- said. “Some efforts gained traction —STRAIGHT TALK Fall 2018— 2 Reckoning continued from page 2 Sears’s Chapter 11 filing is only a lights on. He is the chairman of and (N.A.R.S.E.) was quoted in Chica- short stop on the way to liquidation. a large investor in Seritage Growth Properties, a real estate company go’s Daily Herald on October 16. He As was reported by Michael Corkery that owns 230 former Sears prop- said, “Frankly, I’m surprised (the in The New York Times, “There are erties. Sears pays rent to Seritage, bankruptcy) took so long.” Finan- not strong reasons to be optimis- and a liquidation could imperil cial analysts have long predicated tic,” said Alan Treadgold, a retail that revenue.” Sears’s downfall amid increasing expert at PA consulting. “You exit debt, stiff online competition and the stores that are not viable. You Andrew Dietderich, the attorney store closures. manage the debt. But it still leaves representing investor Fairholme Olbrysh went on to discuss Sears the fundamental question: What is Capital Management LLC, man- Holdings slow response to e-com- the purpose of Sears?” aged by Bruce Berkowitz, who was formerly on the board of directors merce and competitors. “We were Mark Cohen, a former chief execu- of Sears Holdings, said that Sears the number one retailer for many tive of Sears Canada and marketing “isn’t so much a melting ice cube years. We may have gotten a big chief of Sears, who now teaches at as it is a puddle.” ego. When Walmart came on the Columbia Business School, said scene, it was completely ignored. that Sears’s long legacy as the Neil Saunders, managing director And we also ignored Amazon.com. leader in catalog sales and early of GlobalData Retail, wrote in a note We finally caught up, and now we’re experiments with the internet laid a to investors: “In our view, too much Johnny come-lately.” foundation for a different destiny for rot has set in at Sears to make it [a] In the October 12 issue of the Chi- the company whose ads once boast- viable business.” ed it was “Where America Shops.” cago Tribune, Olbrysh said: “In its What About Suppliers? heyday, Sears offered employees “Sears could have been Amazon,” Many suppliers are still gun-shy af- attractive benefits including a ‘phe- he said. ter their experience with Toys R Us, nomenal’ profit-sharing plan, and of which went out of business months Greg Melich, a retail analyst at course, its pension plan. Sears was after filing for Chapter 11 reorga- the retail firm of MoffetNathonson, a good company for me,” he said. nization in the fall of 2017, leaving said that Sears was not well run “I was lucky I got out when I did.” them with millions of dollars in before Mr. Lampert arrived. Stores unpaid bills. Vendors eventually In an October 14 article in The were outdated, and operations recovered only about 20 cents on New York Times, reporter Michael were inefficient. “But (Lampert’s) the dollar. Corkery said: “Even in bankruptcy, value creation strategy didn’t help,” Mr. Lampert will have great sway he said. Manufacturers have already been over the company’s fate. His hedge keeping Sears on a tight leash over In bankruptcy documents, Sears fund owns about 40 percent of the the past few years as the company said Lampert’s hedge fund was company’s debt, including about spiraled downward. But their re- willing to make the opening bid $1.1 billion in loans secured by luctance to work with the company to essentially buy the company’s Sears and Kmart properties. As a heading into the holiday season is 400 most viable stores and keep result, he could force Sears to sell a major blow to its survival. the stores or transfer to him to re- them going. The fate of Sears Holdings depends pay that debt.” In one filing, Robert Riecker, Sears’s on a critical flow of goods to its chief financial officer, said the In response, Olbrysh said: “It is sad stores. As Anne D’Innocenzio re- hedge fund’s “support has ensured to see the company you really loved ported in the Chicago Sun-Times, that the company’s doors remain go down the tubes … (However) “Without a generous supply of open, and over 68,000 individuals Lampert will make out. There is no merchandise, even the company’s remain employed.” question about that.” dwindling base of customers may Analysts’ Comments But, as reported by Mr. Corkery, not shop there, hurting sales Many industry analysts, former re- “Mr. Lampert may have other rea- even more.” tail executives and investors feel that sons to make sure Sears keeps the

—STRAIGHT TALK Fall 2018— 3 TWO RESTRUCTURING EXPERTS NAMED TO SEARS BOARD

As a result of Sears filing its Chapter 11 reorganization In another press release, Sears Hold- plan last October, the company added two restructur- ings announced the appointment of ing experts to its board of directors. WILLIAM L. TRANSIER, also known as “Bill,” as an independent director In a release, Sears Holdings an- of the company’s board of directors. nounced that ALAN J. CARR, managing member and CEO of He is the founder of Transier Advi- Drivetrain, LLC since 2013, has sors, LLC and has been its chief joined as an independent director of executive officer since 2015. Prior the company’s board of directors. to 2015, Mr. Transier served as the William L. CEO and president of Endeavour According to SHC, Carr has sig- Transier International Corporation from Oc- nificant experience as a principal, tober 2006 to December 1, 2014. He was co-founder investor and advisor leading complex of Endeavor International. Alan J. Carr financial restructurings, as well as serving as a director of reorganized businesses in the In addition to his leadership roles at many public United States and Europe. Carr has practiced as a cor- companies, Transier has extensive restructuring ex- porate restructuring attorney at Skadden, Arps, Slate, perience involving companies with complex capital Meagher & Flom LLP from 1997 to 2003, and Ravin, structures and has served on special committees of Sarasohn, Baumgarten, Fisch & Rosen from 1995 to 1997. independent directors responsible for overseeing re- structuring processes. Mr. Carr ser ved as managing director at Strategic Value Partners LLC from 2003 to 2013. He is an investment Mr. Transier has also been an independent director professional with over 20 years experience working from of Gastar Exploration, Inc. since August 13, 2018. He the principal and advisor side on complex, process- has been chairman of the board of Helix Energy Solu- intensive financial situations. He holds a juris doctor, tions Group, Inc. since July 18, 2017, and its director cum laude from Tulane Law School, New Orleans, since October 2000. He served as the lead independent and has a bachelor of arts degree in economics and director of Helix Energy Solutions from March of 2016 sociology from Brandeis University, Waltham, Maine. through July of 2017.

He has served on various boards of companies in North Mr. Transier graduated from the University of Texas with America, Europe and Asia. Mr. Carr is on the board a bachelor of business administration degree with honors of directors of the TEAC Corporation, and he served in accounting. He received his master’s degree in busi- as a non-executive director of Atlas Iron Limited from ness administration from Regis University and attended May 2016 until October of this year. the International Program at Wharton Business School. He studied law at the University of Houston Law Center. He has also been a director of NewPage Corporation; Midstates Petroleum Company, Inc.; Syncora Holdings He began his career in the audit department of KPMG Ltd.; Tidewater Inc.; LightSquared Inc.; Nautilus Hold- LLP, where he held a number of executive positions in- ings and Brookfied DTLA Fund Office Trust Investor cluding national director of its energy practice. He also Inc. And finally he served as a member of the advisory served as an executive vice president and chief financial board at Klockner Pentaplast Durope GmbH & Co. KG. officer of Devon OEI Operating, Inc. from 1999 to 2003.

Edward Lampert, CEO of Sears Holdings, said: “Alan In his role at Devon, he was responsible for functions as- brings deep experience as a director for companies that sociated with corporate treasury, accounting, investor went through complex organizational change. We are relations, corporate communications, human resourc- pleased to welcome him to the board and look forward es, administration, tax, corporate planning, internal to the benefit of his expertise as we work to maximize audit, corporate M&A, business development and mar- value for the company and its stakeholders.” keting and trading. —STRAIGHT TALK Fall 2018— 4 operations: We have received com- SEARS LETTER TO RETIREES REGARDING THE mitments for $300 million in senior COMPANY’S CHAPTER 11 ANNOUNCEMENT— priming debtor-in-possession (DIP) financing from our senior asset- WHAT BENEFITS ARE PROTECTED? based revolving lenders and are negotiating a $300 million sub- On October 15, Mr. Rob Weber, information to share. Importantly, the ordinated DIP financing. Subject Sears chief human resources of- Sears Pension Plan is backed to court approval, this financing N.A.R.S.E. ficer, sent an email by the Pension Benefit Guar- is expected to support our opera- setting forth how SHC’s restruc- anty Corporation (PGBC).” tions—and meet our obligations to turing impacts retiree benefits. He 401(k): “Moreover, any of the money vendors—during this process … ” asked us to get this information to you have contributed to your 401(k) all of our retirees. We have already Keeping You Informed plan is held in trust. By law, it is posted Mr. Weber’s letter on our “We are committed to keeping safe, secure and protected.” website and have also sent emails to you informed throughout the re- our retirees regarding what benefits Healthcare Benefits: “Eligible retir- structuring process, and we will are protected. ees on the company’s benefits plans provide you with timely updates as are not expected to see any disrup- events warrant. Mr. Weber said, in part: tion to their healthcare benefits.” “In the meantime, to help answer “Today we have announced a series Earned Life Insurance: While questions you may have about our of actions to position us to establish life insurance was not mentioned restructuring, we have posted in- a sustainable capital structure, in Mr. Weber’s letter, N.A.R.S.E. formation on the following website: continue streamlining our opera- asked him the status of this very restructuring.searsholdings.com. tions and grow profitably for the important retiree benefit. Paid- If you have additional questions, long term. While we sought to avoid up life insurance after retirement please reach out to the Retiree Ser- a Chapter 11 process, we have ulti- was always presented by Sears’s vices Center. mately determined that this is the management in positive terms, most effective and orderly way to “We thank you for your years of as a benefit secure in the future. achieve a debt solution as efficiently dedicated service to Sears … Mr. Weber assured N.A.R.S.E. that as possible and be better positioned during the Chapter 11 reorganiza- “Sincerely, for the future … tion Sears would continue to make Rob Weber “We are eager to move forward the monthly insurance premiums Chief Human Resources Officer” quickly and preserve as many jobs for the retirees’s life insurance. as possible. We also want to make Mr. Weber went on to state: sure that all of our hardworking associates of Sears Holdings, past “We have sufficient and present … know that we are funding for committed to trying to get the best ongoing possible result for the company … ”

Retirement Benefits As outlined in Mr. Weber’s letter about benefits, he said the following:

Pensions: “First and foremost, we know the pension is very important to you, and it will be an area of focus as the restructuring process moves for- ward. You will continue to receive your monthly pension payments as usual. You will be notified if there is further —STRAIGHT TALK Fall 2018— 5 CAN SEARS SURVIVE AFTER BANKRUPTCY?

This was the question asked in a recent article by Stephanie Zimmermann in the Chicago Sun- Times. Chairman Lampert believes that Chapter 11 reorganization will return the company to profitability.

Seeking Chapter 11 bankruptcy protection does not mean Sears is finished, but succeeding in the current retail environment, even as a smaller company will be tough, said David Stowell, a professor of fi- nance at Northwestern University’s Kellogg School of Management.

“I think they have a shot at it,” Pensive Chairman Lampert Stowell said. A lot depends on under-one roof store and the biggest By the late 1960s, Sears was the whether the company brings in new retailer in the world. world’s largest retailer, and in 1973 management that has the freedom its headquarters in Chicago moved For generations of Americans, the to work creatively, he said. into the world’s tallest building— Sears, Roebuck and Co. catalog was the Sears Tower. However, others analysts were not a shopper’s “bible” of clothing, toys, so optimistic. housewares and hard wares. Mark Where The Company Went Wrong Cohen, a former executive at Sears Between 1981 and 1985, Sears went James Dion, a Chicago-based retail said, “It was the Amazon of its day.” on a spending spree and diversified consultant who worked for Sears by acquiring the stock brokerage as a senior buyer in the late 1970s For generations, Sears was an in- and the real and early ’80s, described Sears and novator in practically every area, estate company . Kmart as “dead man walking” com- including home delivery, product- In fact, “socks and stocks” was the panies whose real estate is worth testing laboratories and employee quip when continued on page 7 more than the brands. It will be profit sharing. hard to get shoppers excited about a new Sears, Dion said.

“The likelihood of them coming back leaner and meaner is kind of slim to none,” he said.

The Rise of Sears Walking through a Sears store today, it’s easy to forget what an innovator the company once was.

Before there was Amazon, Home Depot, Walmart or Kmart there was Sears. From its beginnings as a mail-order watch business in Minneapolis, the company grew to become America’s everything-

—STRAIGHT TALK Fall 2018— 6 Survive? continued from page 6 “Sears missed that window by Sears’s trouble, the truth is far Sears bought Dean Witter in 1981. about four years,” he said. more complicated. Walmart and The company also launched the Target, for example, faced the same And then, the arrival of Lampert and . pressures but didn’t experience the the acquisition of Sears by formerly same problems. But the synergy never worked, and bankrupt Kmart to form Sears Hold- the new businesses contributed to ings Corp. in 2005 —though lauded by Overly leveraged from the Kmart a defuse corporate organization. analysts and the stock market—didn’t deal, Sears was able to prop up its Meanwhile, Walmart, Target, Home work out. The merger was intended stock for a while by cutting and sell- Deport and Costco poached cus- to leverage economies of scale but ing off assets, but eventually there tomers. Sears eventually ditched never really accomplished that. wasn’t enough cash to support all those financial businesses, but of that debt. There were other decisions that problems remained. looked bad in retrospect, analysts As The Wall Street Journal recently In a case of terrible timing, the say, such as selling off the Crafts- opined, “Bankruptcy will allow company dropped its catalog busi- man and DieHard brands. As a Sears to reduce its debt burden, ness in 1993, just a few years before result, many customers had little though Mr. Lampert’s ESL will have the dawn of Internet shopping. If it reason to go into a Sears store. to swallow large losses that he no had stayed in the game, it might doubt wanted to avoid. Yet Sears “It was some bad luck, bad timing but have harnessed its customer base, will never recover if Mr. Lampert clearly some questionable manage- diverse product categories and insists on starving the business of ment decisions,” professor Stowell said. nationwide warehouse and distri- investment. Sears’s travails are a bution system to beat Amazon to Stowell said even though people reminder that short-term manage- the punch, Dion said. like to blame online shopping for ment rarely prospers.”

BANKRUPT, NOT CLOSED SEARS ATLANTA BIG CLUB By Lauren Coleman-Lochner, The Sears Atlanta Big Club is the largest Sears re- Bloomberg, October 31, 2018 tiree club in the country. The club meets four times This bankruptcy filing causes a make-or-break time a year, with the next meeting on December 3, 2018. for Sears, which is working hard to make sure custom- For 2019 club meeting dates, contact Jon White at ers don’t equate “bankrupt” with “closed.” A banner 404-455-5540. on the Sears and Kmart websites reads “We’re Open to Serve You”—a bid by the company to reassure shoppers. Fellow retailer Toys “R” Us Inc. recently tried to reorganize in bankruptcy, but failed, and it was criticized for doing too little to convince shoppers it would survive.

Sears actually saw a boost in sales in recent weeks, said Peter Boutros, chief brand officer for Sears and Kmart. A company lawyer also told a judge last week that Sears was doing better than expected and doesn’t have “a significant liquidity need right now” after the company postponed plans to finalize the second piece of the bankruptcy loan.

“When we announced Chapter 11, we had a significant bump in sales and store traffic,” Boutros said … John Dubois, Treasurer; Jon White, The company’s fight to survive is bringing out the best President; Gail Walton, Secretary; of its employees, Boutros said. “It was fascinating to and Skip Baliles, Vice-President” see the jolt that Chapter 11 did to our culture,” he said. —STRAIGHT TALK Fall 2018— 7 How Kohl’s Is Succeeding Where Others Haven’t For starters, its CEO says she doesn’t think of the company as a department store

By Suzanne Kapner, MS. GASS: We haven’t faced the The Wall Street Journal, same pressure to close stores as October 30, 2018. other retailers have. The moves we are making to use our stores differ- Department stores, once the go-to ently are helping us to keep them destination for the shopping needs relevant. We are making our stores of the entire family, have been un- smaller. We are looking at opportu- der assault as buying has shifted nities to lease out extra space. In online and to more value-oriented Milwaukee, we are leasing space to chains such as Walmart Inc. and Aldi [the supermarket chain]. We T.J. Maxx. put up a wall. We’re reducing the While other types of retailers, in- inventory by double digits and as- cluding Best Buy Co. and Target sorting as a smaller store. Corp., have pivoted enough to sur- Embracing Amazon vive the retail crisis of recent years, WSJ: Last year, you launched in which dozens of chains went un- a partnership with Amazon.com. der and hundreds of stores closed, You’ve created dedicated depart- department stores have been slower Michelle Gass ments to showcase some Amazon to change. electronic products such as Echo. company in 2013, spoke to The Wall Sears Holdings Corp. and Bon-Ton And you are allowing shoppers to Street Journal about the changing Stores Inc., two venerable depart- return purchases from Amazon at retail market and what Kohl’s is ment stores that dominated their Kohl’s stores. Weren’t you nervous doing to stay ahead of the competi- markets for much of the past centu- about getting in bed with a company tion. Edited excerpts follow. ry, filed for bankruptcy protection that is upending the retail industry? this year. Others are struggling to WSJ: Why do you think Kohl’s is MS. GASS: There is a lot of space stay relevant, including J.C. Pen- having success when so many other for both of us. In thinking about the ney Co., which is on its third chief retailers, especially department partnership, it was how do we take executive in seven years as it has ca- stores, are struggling? Amazon’s dramatic customer base reened from one strategy to another. MS. GASS: We don’t think of our- and combine it with Kohl’s physical Kohl’s Corp., by contrast, is sur- selves as a department store. We stores to create value for both of us. viving the onslaught better than aren’t in malls. Our stores have WSJ: How is it going so far? many of its peers. It has tried to do a racetrack design, which makes things differently, including strik- them easy to navigate. The cash MS. GASS: We now accept Ama- ing a controversial partnership with registers are at the front of the zon returns in 100 stores and have Amazon.com Inc. and teaming with store, rather than dispersed in de- dedicated Amazon departments in social-media platform PopSugar partments, which makes checkout 30 stores. Based on the volume of Inc. to design a line of clothes. easy to locate. From the early days, returns we are getting, people are The result has been a string of we created a model that is easier using the service. What we are try- strong sales. and more convenient for shoppers ing to determine is, of the people than a typical department store. coming in and returning some- Chief Executive Michelle Gass, thing from Amazon, how many are a 50-year-old former Starbucks WSJ: You have more than 1,100 stores. crossing continued on page 9 Corp. executive who took the helm Unlike other retailers, you haven’t of Kohl’s in May after joining the had mass closings. Why is that? —STRAIGHT TALK Fall 2018— 8 Kohl’s continued from page 8 MS. GASS: Thirty-five percent of tion and speed. Those that are too the aisle and buying something the sales are online, which is much slow will be left behind. You aren’t from Kohl’s? higher than our overall average. always going to get it right, but you’ve got to be out there trying ‘Mindset of experimentation’ WSJ: Another way department things and really have a mind-set WSJ: Department stores tend stores tend to get younger shop- of experimentation. to have an older customer base. pers is through their gift registry What are you doing to reach young- business. Yet, you chose to exit that WSJ: With so many retailers disap- er shoppers? business. Why? pearing—Toys “R” Us Inc. recently closed all its stores—where do you MS. GASS: That’s where PopSugar MS. GASS: We weren’t creating a see opportunity to pick up market comes into play. It’s one of the most great customer experience, so I’d share this holiday season? wide-reaching social-media proper- rather not be in the business. We’ll ties for millennial females. We were probably bring it back someday, but MS. GASS: We’re getting into the already advertising some of our it will look a lot different. When you toy business in a bigger way. We ® brands on PopSugar. That told us do things like that, it forces you to added the Lego and FAO Schwarz they are reaching the customers we think about making a sea change brands. With Bon-Ton not around, want to reach. versus an incremental change. that store had a lot of overlap with Kohl’s. We plan to go after We designed and produced a cloth- WSJ: Change can be hard for people those customers. ing collection with them. The first in big organizations. How have you line is in stores now. tried to get your team to embrace it? Ms. Kapner is a reporter for The Wall Street Journal in New York. Email WSJ: How can you tell whether it’s MS. GASS: I tell them the most her at [email protected]. resonating with younger shoppers? important thing is around innova-

Mnuchin Must Stand down from GOOD NEWS FOR RETIREES! Sears Matters, Senators Say Seniors and other Americans receiving Social Se- Three democrats on the Senate Finance Committee are de- curity will see the largest increase to their benefits manding Treasury Secretary Steven Mnuchin to formally since 2012, and for the first time in years it won’t recuse himself from any matters before the Pension Benefit be largely consumed by higher health-care costs. Guaranty Corp. (PBGC) related to Sears Holding Co., where he was once a board member. They said, “Anything short of The 2019 cost-of-living Social Security increase full recusal will present a significant conflict of interest and will be 2.8 percent, which translates into an av- risk bias in any PBGC decisions and actions.” erage increase in retiree benefits of about $40 a month. More than 62 million Americans receive Senators Bob Menendez, D-N.J.; Sherrod Brown, D-Ohio and Social Security benefits, most of them retirees. Ron Wyden, D-Ore. and the ranking Democrat on the panel, made the demand in a letter to Mnuchin on October 19. The cost-of-living adjustment, based on a formula that reflects changes in consumer Mnuchin sits on the board of the federal PBGC, which prices, will be the largest for the monthly pay- considers applications from companies to terminate their ments since a 3.6 percent increase in 2012. In pension plans, and it pays retirees, at least in part, if the 2018, the increase was 2.0 percent. employer defaults. The gains come after no change to benefit pay- The agency is listed among the biggest unsecured creditors ments in 2016 and a 0.3 percent increase in 2017. of bankrupt Sears. Mnuchin promised in his confirmation hearing to recuse himself from any Sears’s matters that Meanwhile, the pace of price increases for came before the pension board. medical care has eased since 2016 and is growing in recent months at a slower rate The senators said Mnuchin and Eddy Lampert were college than overall inflation. Medicare costs are also roommates and close friends, with Lampert attending the expected to stay in check next year. confirmation hearing and sitting in seats reserved for fam- ily and friends. —STRAIGHT TALK Fall 2018— 9 Cmdr. Vernon (Vern) F. Vikingson, USN Rtd. December 9, 1925—July 1, 2018

Vern grew up in Minneapolis. He 2012 when funds ran out, and the joined Sears and worked part membership shrunk by reason of time while attending university in age, deaths and ill health. Seattle, Washington, in 1946 with The volunteer activities were fo- the Navy ROTC officer candidate cused on mentoring in Chicago program. It was there he met his schools, initially the Gregory future wife Gloria. They were mar- school, on the West Side, near ried in 1951. Homan and Arthington and later After completion of his Naval for over 15 years at the Corkery full-time service, he resumed his school at West 25th Street. employment with Sears full time Every Thanksgiving SRV MEM- while continuing to be in the U.S. BERS assembled and delivered Navy active reserves, eventually Thanksgiving Meals (baskets) for moving to Chicago and residing needy families of children attend- in Glenview, Illinois, with his ing Corkery Elementary school. wife Gloria. The funds had been donated by At Sears he moved up the corpo- Sears when Ed Brennan was CEO. rate ladder from clerk to become senior buyer of Another major charity involved working with the men’s clothing which involved worldwide travel. Chicago Food Depository every Saturday.

His Navy Reserve career continued at The Great Vern was a conscientious leader, always mild man- Lakes Naval Station where he continued to serve nered and quick with a smile. Those of us who attaining the rank of commander, retiring from the volunteered with him and met for an occasional Navy in 1985. lunch when SRV ceased operations miss him and Gloria who passed away two years prior to Vern. He retired from Sears in 1989 after logging over 45 years of service. Vern and Glo- After Gloria passed away and Vern ria enjoyed travel and volunteer was in his 90th year, he took a pursuits. They had no children 6,000-mile driving tour across the but were close to other family United States visiting old haunts, members, nieces and nephews in then a European River cruise; he the Midwest. was accompanied by a nephew-in- law. That speaks of the measure In 1993 Vern became a member of of the man. Two days before he a group of Sears’s retirees under passed away, while recovering the banner of SEAR’S RETIREE Back Row: Bill Barker, from a near fatal heart attack he VOLUNTEERS, logo SRV. This Joan Munson, Vern Vikingson; was up and about planning his group volunteered as a group until Front Row: Tom & Lucy Keevil next escapade.

—STRAIGHT TALK Fall 2018— 10 LAMPERT COMING TO GRIPS WITH FAILURE

In an interview with The New York place to relax. It was an attempt to However, by then it was too late. Times shortly after the announcement get customers, many of whom didn’t Caught in a spiral of declining of Sears filing for bankruptcy protec- have internet access at home at the sales, huge losses, store closings, tion, Chairman Edward Lampert time, into stores, much as Star- forced asset sales and relentless said, “I’ve taken a huge personal hit. bucks had attracted laptop-toting competition from online rivals, Not just in money, but time. There’s coffee drinkers. Sears struggled for its day-to-day been an enormous opportunity cost.” existence, a war of attrition that This proposal went totally con- ended with Sears filing for bank- He went on to state that by 2009, trary to traditional retailers, who ruptcy protection. he realized that nothing less than measured success strictly in terms a radical transformation of Sears’s of sales per square foot and for The interviewer, Mr. James B. Stew- culture would allow it to keep up whom any space not dedicated to art said that Mr. Lampert “ … will with the digital revolution that was merchandise was a waste. None- likely emerge from the Sears col- transforming the retail industry. theless, the computer-equipped lapse with many more assets than That year, Lampert launched the internet lounges were rolled out most people realize. He owns lavish company’s “Shop Your Way” cam- in 100 Sears’s locations—but in a homes in Greenwich, Connecticut, paign as the cornerstone of the new halfhearted manner. and Indian Creek, Florida, just data-driven and customer-focused off Miami Beach. But he no lon- “I’d visit a store, and there’d be strategy to compete with Amazon. ger makes the cut for Forbe’s 400 10 computers,” Lampert recalled. richest Americans. His net worth Lampert admitted that he didn’t “Half of them wouldn’t work.” The has plunged by $3 billion since pick the best executives to fully lounges were abandoned. “We didn’t peaking at $4.5 billion in 2007, the embrace the company’s digital have store leaders or a C.E.O. at magazine estimates. At Sears, all make over. “I underestimated how the time who embraced the idea,” of his compensation was in stock. difficult it is to do and how critical Lampert said. He never sold a share. The stock is are the right people to lead and to In 2013. Lampert himself became now all but worthless.” get people to buy in,” he said. CEO of Sears, something he said he Editor’s Note: This article was In something not well publicized, had never aspired to. He expected to edited from Mr. James B. Stewart’s Lampert cited his attempt to con- stay in that role only a few months. interview with Edward Lampert ap- vert underutilized space in the “I wanted to be an idea generator,” pearing in The New York Times on stores into internet lounges, which he said. “I was trying to be a cata- October 18, 2018 offered customers free Wi-Fi and a lyst, not the operating person.”

N.A.R.S.E. NEEDS YOU!

No one knows whether Sears’s bankruptcy reor- As your chairman, I am asking you to renew your ganization will be successful. Whatever happens, N.A.R.S.E. membership for 2019. Enclosed is your N.A.R.S.E. will keep you informed. And whatever Membership/Renewal Application form and mailing Sears tell us, we will tell you. envelope. If you have already renewed for next year, then please pass the application form to someone who However we can only continue to communicate to would be interested in supporting our organization. you through your financial support. What will hap- pen to your life insurance if Sears liquidates? We We wish you a Happy Thanksgiving, a very Merry will tell you. Christmas and Happy Holidays to everyone, and the best wishes for Sears Holdings and all of us in 2019! This issue of Straight Talk could not be printed and mailed to you without your continued financial Ron Olbrysh, N.A.R.S.E. Chairman support and the support of many others.

—STRAIGHT TALK Fall 2018— 11 Hey Sears— Whirlpool Wants Its Appliances Back!

The Benton Harbor, Michigan-based the U.S. Bankruptcy Court. tential declines through increased home appliance manufacturer sales elsewhere, the company said. Whirlpool argued that Sears was in- Whirlpool wants its inventory back solvent when it ordered the goods and The bankruptcy code gives compa- from now-bankrupt Sears Holdings. therefore has no legal right to them. nies who sent products to a buyer Sears listed Whirlpool as one of its on credit shortly before a bank- Whirlpool did not have a comment largest unsecured creditors in its ruptcy filing the right to reclaim on the report. A spokesperson for bankruptcy filing, saying it owed those goods, as long as the specific Sears also declined to comment. the appliance maker $23.4 million. items can be identified. However, in a press release earlier in Whirlpool, which makes washing It’s common to see those claims in October, Whirlpool said it expected machines, refrigerators and dish retail bankruptcy cases, said Daniel Sears’s bankruptcy to have “a very washers, among other appliances, Lowenthal, partner at Patterson, limited impact” on its operations, sent a letter to Sears last month Belknap, Webb & Tyler and chair of the adding that as of September 30, only asking that the retailer return New York firm’s business reorgani- 1 percent of the company’s aggre- items it had received from Whirl- zation and creditors’ rights practice. gate accounts receivable exposure pool in the 45 days leading up to was related to Sears. Whirlpool’s It’s not clear whether Whirlpool and its October 15 bankruptcy filing, net sales to Sears comprised other companies will be successful, according to The New York Post. less than 2 percent of its global since it’s difficult to send goods back In a letter filed in court following sales, the manufacturer wrote. once they’ve made it to the buyer’s Sears’s bankruptcy, Whirlpool’s warehouse or sales floor, said Neil Whirlpool added that it does not attorney demanded that Sears Stern, senior partner at Chicago-based expect Sears’s bankruptcy to ma- “refrain from selling, disposing or consulting firm McMillan Doolittle. terially impact its financial results using … for any purpose whatso- over the long term. After past dis- “It certainly doesn’t help Sears” in ever” the merchandise it received ruptions to its distribution network, its efforts to reorganize and keep from the appliance-maker during Whirlpool has been able to offset po- stores going, he said. that time without permission from 12