Sears Hometown files for bankruptcy; to liquidate inventory

Sears Hometown Stores Inc. has filed for Chapter 11 bankruptcy protection amid disputes with its parent company.

The retailer, a division of Transform Holdco (or “the new Sears”) listed assets of no more than $50 million and liabilities of at least $50 million in its bankruptcy court petition, which was filed in Delaware. The filing also lists Eddie Lampert, the CEO of Sears’ holding company Transformco, as a 37.75% owner of Sears Hometown.

Sears Hometown was spun off from Sears Holdings Corp., the former parent company of Sears and Kmart, in 2012. It was acquired by Transform in June 2019, which said the transaction would reunite Sears and Kmart with Sears Hometown and accelerate Transform's strategy of growing its smaller store format. Sears Hometown stores, which average 8,000 to 10,000 sq. ft., focus on selling appliances, tools and lawn and garden equipment.

At the time, there were 491 Sears Hometown stores.  Its footprint has since shrunk to approximately 121 stores, which are locally owned and operated businesses, in 26 states and Puerto Rico.

[Read More: Report: Sears Hometown in big store closing move]

“We are excited to bring Sears Hometown, its associates and network of independent dealers and franchisees back into the Sears and Kmart family,” said Edward S. Lampert, chairman of Transform, at the time of the acquisition. “Our investment demonstrates our commitment to growing Transform for the benefit of our members and customers, associates, vendors and communities across the country.”

Sears Hometown’s financial performance has suffered during the last few years from a number of factors, including declining sales, rising costs and the “hangover” from the COVID-19 pandemic, the company stated in its filing.  For the year ended January 29, 2022, the chain incurred recurring operating and net losses from continuing operations of $16.2 million and $18.3 million, respectively.

Also, Sears Hometown CEO Elissa Robertson noted in the filing that the retailer relies “substantially on TransformCo to provide key products and services,” and that the bankruptcy is necessary partially because TransformCo failed to do so.

During the past year, Sears Hometown and TransformCo had disputes regarding finances and inventory, with a “lack of inventory” causing a “rapid downward spiral that contributed to the filing of these Chapter 11 Cases,” the company stated.

According to the filing, Sears Hometown plans to use the Chapter 11 bankruptcy process to liquidate the merchandise at its stores.