OCTOBER 15, 2018—THE DAY OF RECKONING FINALLY ARRIVED...

1—STRAIGHT TALK Fall 2018—

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

Sears Holdings has def ied pre-d ict ions of its bankruptcy for years. But after much specula-tion and rumors, the company on October 15, fac-ing a $134 million debt payment, announced a se-r ies of act ions to reposition the company and re-vive its fortunes.

Among these actions included the filing of debt relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The company will also close an additional 142 unprofitable stores near the end of the year bringing the total number of Sears and Kmart stores down to around 500.

The Chapter 11 filing doesn’t mean the end of Sears, but it marks yet another bad sign for the 125-year-old company that was once a giant of American retail. But Sears ar-gued in its bankruptcy filing that given enough time and less debt, it

would be able to revise its decade-long decline.

“Will Sears be relegated to the dustbin of history, and will 68,000 Americans lose their jobs, or will Sears enter the next chapter of its life as an iconic American com-pany,” wrote Robert A. Riecker, the company’s chief financial officer, in bankruptcy court filings.

Sears further said in court papers it faces “catastrophic consequences” if it can’t repair its unraveling sup-ply chain. Some 200 vendors have stopped shipping goods to its stores during the first two weeks in Octo-

ber, and it faces potential liens if it can’t pay logis-t ics companies owed million of dol la rs in the coming weeks.

The company’s l e n d e r s h a v e agreed to provide $300 million in bankruptcy f i-n a n c i n g a n d Edward Lampert i s i n d i s c us -sions to provide

another $300 mil l ion to keep t h e c o mp a n y i n b u s i n e s s through the hol iday season.

Volume 21, Issue 2 Fall, 2018

This issue of STRAIGHT TALK:Sears Day of Reckoning p. 1Two New Sears Directors p. 4Sears Letter to Retirees p. 5Survive After Bankruptcy? p. 6Bankrupt, Not Closed p. 7Atlanta Big Club Photo p. 7How Kohl’s is Succeeding p. 8Sec. Mnuchin & the PBGC p. 9Good News For Retirees p. 9Vern Vikingson Obituary p. 10Edward Lampert Interview p. 11N.A.R.S.E. Needs You! p. 11What Whirlpool Wants! p. 12

Store Closings

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“It’s an American tragedy and it need not have happened,” said Arthur Martinez, who was CEO of Sears from 1995 to 2000.

And President Trump said that the company “has been dying for many years.” He blamed Sears’s decline on poor management, saying the company was “improperly run for many years.”

Sears Reorganization TeamAlong with the actions taken on October 15, Eddy Lampert has stepped down from his role as chief executive officer of the company. He will remain chairman of the board. The company’s board created an Office of the CEO, which will be re-sponsible for managing the company’s day-to-day operations during the bankruptcy process.

The Office of the CEO will be composed of Rob-ert A. Riecker, chief financial officer; Leena Munjal, chief digital offi-cer, customer experience and integrated retail; and Gregory Ladley, president of apparel and footwear.

The Sears Board also formed a special committee that will oversee the restructuring pro-cess and have decision-making authority with respect to transac-tions involving affiliated parties. The Restructuring Committee consists solely of independent directors and includes Alan J. Carr, Paul G. DePodesta, Ann N. Reese and William L. Transier.

Additionally, Mohsin Y. Meghji, managing partner of M-III Part-ners, has been appointed chief restructuring officer. Meghji is a nationally recognized U.S. turn-

around professional with a track record of revitalizing companies experiencing financial, operational or strategic transitions to maximize value for stakeholders.

Mr. Meghji has joined the com-pany’s senior management team and will help lead the company’s restructuring efforts, reporting to the Restructuring Committee.

Chairman Lampert’s Comments“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” said Edward Lampert. “While we have made progress, the

plan has yet to deliver the results we have desired, and addressing the company’s immediate liquidity needs has impacted our efforts to become a profitable and more com-petitive retailer.”

“Everything I have done as an in-vestor to Sears Holdings has been with the goal of helping the com-pany and its people succeed,” Mr. Lampert said in a statement when he resigned as CEO.

“We choose transformational rather than traditional strategies,” he said. “Some efforts gained traction

while others did not, and there were external factors that have severely hurt the company … I invested so much of my time and money in the company because I believe Sears has a future.”

“The Chapter 11 process will give Holdings the flexibility to strength-en its balance sheet, enabling the company to accelerate its strategic transformation, continue right sizing its operating model, and re-turn to profitability. Our goal is to achieve a comprehensive restruc-turing as efficiently as possible, working closely with our creditors and other debt holders, and be

better positioned to exe-cute on our strategy and key priorities,” he said.

Chairman Lampert add-ed: “As we look toward the holiday season, Sears and Kmart stores remain open for business, and our dedicated associates look forward to serving our members and cus-tomers. We thank our vendors for their con-tinuing support through the upcoming season and beyond. We also thank our associates for

their hard work and commitment to providing millions of Americans with value and convenience.”

Mr. Lampert is still betting on Sears. At an employee gathering at Sears’s headquarters after the bankruptcy was announced, he told employees, “I don’t view today as a funeral, but as a new beginning.”

N.A.R.S.E. Chairman’s CommentsRon Olbrysh, chairman of the Na-tional Association of Retired Sears Employees

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Reckoning continued from page 1


(N.A.R.S.E.) was quoted in Chica-go’s Daily Herald on October 16. He said, “Frankly, I’m surprised (the bankruptcy) took so long.” Finan-cial analysts have long predicated Sears’s downfall amid increasing debt, stiff online competition and store closures.

Olbrysh went on to discuss Sears Holdings slow response to e-com-merce and competitors. “We were the number one retailer for many years. We may have gotten a big ego. When Walmart came on the scene, it was completely ignored. And we also ignored Amazon.com. We finally caught up, and now we’re Johnny come-lately.”

In the October 12 issue of the Chi-cago Tribune, Olbrysh said: “In its heyday, Sears offered employees attractive benefits including a ‘phe-nomenal’ profit-sharing plan, and of course, its pension plan. Sears was a good company for me,” he said. “I was lucky I got out when I did.”

In an October 14 article in The New York Times, reporter Michael Corkery said: “Even in bankruptcy, Mr. Lampert will have great sway over the company’s fate. His hedge fund owns about 40 percent of the company’s debt, including about $1.1 billion in loans secured by Sears and Kmart properties. As a result, he could force Sears to sell the stores or transfer to him to re-pay that debt.”

In response, Olbrysh said: “It is sad to see the company you really loved go down the tubes … (However) Lampert will make out. There is no question about that.”

Analysts’ CommentsMany industry analysts, former re-tail executives and investors feel that

Sears’s Chapter 11 filing is only a short stop on the way to liquidation.

As was reported by Michael Corkery in The New York Times, “There are not strong reasons to be optimis-tic,” said Alan Treadgold, a retail expert at PA consulting. “You exit the stores that are not viable. You manage the debt. But it still leaves the fundamental question: What is the purpose of Sears?”

Mark Cohen, a former chief execu-tive of Sears Canada and marketing chief of Sears, who now teaches at Columbia Business School, said that Sears’s long legacy as the leader in catalog sales and early experiments with the internet laid a foundation for a different destiny for the company whose ads once boast-ed it was “Where America Shops.”

“Sears could have been Amazon,” he said.

Greg Melich, a retail analyst at the retail firm of MoffetNathonson, said that Sears was not well run before Mr. Lampert arrived. Stores were outdated, and operations were inefficient. “But (Lampert’s) value creation strategy didn’t help,” he said.

In bankruptcy documents, Sears said Lampert’s hedge fund was willing to make the opening bid to essentially buy the company’s 400 most viable stores and keep them going.

In one filing, Robert Riecker, Sears’s chief financial officer, said the hedge fund’s “support has ensured that the company’s doors remain open, and over 68,000 individuals remain employed.”

But, as reported by Mr. Corkery, “Mr. Lampert may have other rea-sons to make sure Sears keeps the

lights on. He is the chairman of and a large investor in Seritage Growth Properties, a real estate company that owns 230 former Sears prop-erties. Sears pays rent to Seritage, and a liquidation could imperil that revenue.”

Andrew Dietderich, the attorney representing investor Fairholme Capital Management LLC, man-aged by Bruce Berkowitz, who was formerly on the board of directors of Sears Holdings, said that Sears “isn’t so much a melting ice cube as it is a puddle.”

Neil Saunders, managing director of GlobalData Retail, wrote in a note to investors: “In our view, too much rot has set in at Sears to make it [a] viable business.”

What About Suppliers?Many suppliers are still gun-shy af-ter their experience with Toys R Us, which went out of business months after filing for Chapter 11 reorga-nization in the fall of 2017, leaving them with millions of dollars in unpaid bills. Vendors eventually recovered only about 20 cents on the dollar.

Manufacturers have already been keeping Sears on a tight leash over the past few years as the company spiraled downward. But their re-luctance to work with the company heading into the holiday season is a major blow to its survival.

The fate of Sears Holdings depends on a critical flow of goods to its stores. As Anne D’Innocenzio re-ported in the Chicago Sun-Times, “Without a generous supply of merchandise, even the company’s dwindling base of customers may not shop there, hurting sales even more.”

Reckoning continued from page 2


TWO RESTRUCTURING EXPERTS NAMED TO SEARS BOARD

As a result of Sears filing its Chapter 11 reorganization plan last October, the company added two restructur-ing experts to its board of directors.

In a release, Sears Holdings an-nounced that ALAN J. CARR , managing member and CEO of Drivetrain, LLC since 2013, has joined as an independent director of the company’s board of directors.

According to SHC, Carr has sig-nificant experience as a principal, investor and advisor leading complex financial restructurings, as well as

serving as a director of reorganized businesses in the United States and Europe. Carr has practiced as a cor-porate restructuring attorney at Skadden, Arps, Slate, Meagher & Flom LLP from 1997 to 2003, and Ravin, Sarasohn, Baumgarten, Fisch & Rosen from 1995 to 1997.

Mr. Carr served as managing director at Strategic Value Partners LLC from 2003 to 2013. He is an investment professional with over 20 years experience working from the principal and advisor side on complex, process-intensive financial situations. He holds a juris doctor, cum laude from Tulane Law School, New Orleans, and has a bachelor of arts degree in economics and sociology from Brandeis University, Waltham, Maine.

He has served on various boards of companies in North America, Europe and Asia. Mr. Carr is on the board of directors of the TEAC Corporation, and he served as a non-executive director of Atlas Iron Limited from May 2016 until October of this year.

He has also been a director of NewPage Corporation; Midstates Petroleum Company, Inc.; Syncora Holdings Ltd.; Tidewater Inc.; LightSquared Inc.; Nautilus Hold-ings and Brookfied DTLA Fund Office Trust Investor Inc. And finally he served as a member of the advisory board at Klockner Pentaplast Durope GmbH & Co. KG.

Edward Lampert, CEO of Sears Holdings, said: “Alan brings deep experience as a director for companies that went through complex organizational change. We are pleased to welcome him to the board and look forward to the benefit of his expertise as we work to maximize value for the company and its stakeholders.”

In another press release, Sears Hold-ings announced the appointment of WILLIAM L. TRANSIER, also known as “Bill,” as an independent director of the company’s board of directors.

He is the founder of Transier Advi-sors, LLC and has been its chief executive officer since 2015. Prior to 2015, Mr. Transier served as the CEO and president of Endeavour International Corporation from Oc-

tober 2006 to December 1, 2014. He was co-founder of Endeavor International.

In addition to his leadership roles at many public companies, Transier has extensive restructuring ex-perience involving companies with complex capital structures and has served on special committees of independent directors responsible for overseeing re-structuring processes.

Mr. Transier has also been an independent director of Gastar Exploration, Inc. since August 13, 2018. He has been chairman of the board of Helix Energy Solu-tions Group, Inc. since July 18, 2017, and its director since October 2000. He served as the lead independent director of Helix Energy Solutions from March of 2016 through July of 2017.

Mr. Transier graduated from the University of Texas with a bachelor of business administration degree with honors in accounting. He received his master’s degree in busi-ness administration from Regis University and attended the International Program at Wharton Business School. He studied law at the University of Houston Law Center.

He began his career in the audit department of KPMG LLP, where he held a number of executive positions in-cluding national director of its energy practice. He also served as an executive vice president and chief financial officer of Devon OEI Operating, Inc. from 1999 to 2003.

In his role at Devon, he was responsible for functions as-sociated with corporate treasury, accounting, investor relations, corporate communications, human resourc-es, administration, tax, corporate planning, internal audit, corporate M&A, business development and mar-keting and trading.

Alan J. Carr

William L. Transier


SEARS LETTER TO RETIREES REGARDING THE COMPANY’S CHAPTER 11 ANNOUNCEMENT—

WHAT BENEFITS ARE PROTECTED?On October 15, Mr. Rob Weber, Sears chief human resources of-f icer, sent N.A.R.S.E. an email setting forth how SHC’s restruc-turing impacts retiree benefits. He asked us to get this information to all of our retirees. We have already posted Mr. Weber’s letter on our website and have also sent emails to our retirees regarding what benefits are protected.

Mr. Weber said, in part:

“Today we have announced a series of actions to position us to establish a sustainable capital structure, continue streamlining our opera-tions and grow profitably for the long term. While we sought to avoid a Chapter 11 process, we have ulti-mately determined that this is the most effective and orderly way to achieve a debt solution as efficiently as possible and be better positioned for the future …

“We are eager to move forward quickly and preserve as many jobs as possible. We also want to make sure that all of our hardworking associates of Sears Holdings, past and present … know that we are committed to trying to get the best possible result for the company … ”

Retirement BenefitsAs 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

information to share. Importantly, the Sears Pension Plan is backed by the Pension Benef it Guar-a nt y C or p orat i on ( P GBC ) .”

401(k): “Moreover, any of the money you have contributed to your 401(k) plan is held in trust. By law, it is safe, secure and protected.”

Healthcare Benefits: “Eligible retir-ees on the company’s benefits plans are not expected to see any disrup-tion to their healthcare benefits.”

Earned Life Insurance: While life insurance was not mentioned in Mr. Weber’s letter, N.A.R.S.E. asked him the status of this very important retiree benefit. Paid-up life insurance after retirement was always presented by Sears’s management in positive terms, as a benefit secure in the future. Mr. Weber assured N.A.R.S.E. that during the Chapter 11 reorganiza-tion Sears would continue to make the monthly insurance premiums for the retirees’s life insurance.

Mr. Weber went on to state:

“We have sufficient funding for ongoing

operations: We have received com-mitments for $300 million in senior priming debtor-in-possession (DIP) financing from our senior asset-based revolving lenders and are negotiating a $300 million sub-ordinated DIP financing. Subject to court approval, this financing is expected to support our opera-tions—and meet our obligations to vendors—during this process … ”

Keeping You Informed“We are committed to keeping you informed throughout the re-structuring process, and we will provide you with timely updates as events warrant.

“In the meantime, to help answer questions you may have about our restructuring, we have posted in-formation on the following website: restructuring.searsholdings.com. If you have additional questions, please reach out to the Retiree Ser-vices Center.

“We thank you for your years of dedicated service to Sears …

“Sincerely,Rob Weber Chief Human Resources Officer”


CAN SEARS SURVIVE AFTER BANKRUPTCY?This was the question asked in a recent art icle 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,” Stowell said. A lot depends on whether the company brings in new management that has the freedom to work creatively, he said.

However, others analysts were not so optimistic.

James Dion, a Chicago-based retail consultant who worked for Sears as a senior buyer in the late 1970s and early ’80s, described Sears and Kmart as “dead man walking” com-panies whose real estate is worth more than the brands. It will be 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 SearsWalking 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-

under-one roof store and the biggest retailer in the world.

For generations of Americans, the Sears, Roebuck and Co. catalog was a shopper’s “bible” of clothing, toys, housewares and hard wares. Mark Cohen, a former executive at Sears said, “It was the Amazon of its day.”

For generations, Sears was an in-novator in practically every area, including home delivery, product-testing laboratories and employee profit sharing.

By the late 1960s, Sears was the world’s largest retailer, and in 1973 its headquarters in Chicago moved into the world’s tallest building—the Sears Tower.

Where The Company Went WrongBetween 1981 and 1985, Sears went on a spending spree and diversified by acquiring the stock brokerage Dean Witter Reynolds and the real estate company Coldwell Banker. In fact, “socks and stocks” was the quip when

Pensive Chairman Lampert

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Sears bought Dean Witter in 1981. The company also launched the Discover card.

But the synergy never worked, and the new businesses contributed to a defuse corporate organization. Meanwhile, Walmart, Target, Home Deport and Costco poached cus-tomers. Sears eventually ditched those financial businesses, but problems remained.

In a case of terrible timing, the company dropped its catalog busi-ness in 1993, just a few years before the dawn of Internet shopping. If it had stayed in the game, it might have harnessed its customer base, diverse product categories and nationwide warehouse and distri-bution system to beat Amazon to the punch, Dion said.

“Sears missed that window by about four years,” he said.

And then, the arrival of Lampert and the acquisition of Sears by formerly bankrupt Kmart to form Sears Hold-ings Corp. in 2005—though lauded by analysts and the stock market—didn’t work out. The merger was intended to leverage economies of scale but never really accomplished that.

There were other decisions that looked bad in retrospect, analysts say, such as selling off the Crafts-man and DieHard brands. As a result, many customers had little reason to go into a Sears store.

“It was some bad luck, bad timing but clearly some questionable manage-ment decisions,” professor Stowell said.

Stowell said even though people like to blame online shopping for

Sears’s trouble, the truth is far more complicated. Walmart and Target, for example, faced the same pressures but didn’t experience the same problems.

Overly leveraged from the Kmart deal, Sears was able to prop up its stock for a while by cutting and sell-ing off assets, but eventually there wasn’t enough cash to support all of that debt.

As The Wall Street Journal recently opined, “Bankruptcy will allow Sears to reduce its debt burden, though Mr. Lampert’s ESL will have to swallow large losses that he no doubt wanted to avoid. Yet Sears will never recover if Mr. Lampert insists on starving the business of investment. Sears’s travails are a reminder that short-term manage-ment rarely prospers.”

Survive? continued from page 6

BANKRUPT, NOT CLOSEDBy Lauren Coleman-Lochner, Bloomberg, October 31, 2018

This bankruptcy filing causes a make-or-break time for Sears, which is working hard to make sure custom-ers don’t equate “bankrupt” with “closed.” A banner 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 …

The company’s fight to survive is bringing out the best of its employees, Boutros said. “It was fascinating to see the jolt that Chapter 11 did to our culture,” he said.

SEARS ATLANTA BIG CLUBThe Sears Atlanta Big Club is the largest Sears re-tiree club in the country. The club meets four times a year, with the next meeting on December 3, 2018. For 2019 club meeting dates, contact Jon White at 404-455-5540.

John Dubois, Treasurer; Jon White, President; Gail Walton, Secretary; and Skip Baliles, Vice-President”


How Kohl’s Is Succeeding Where Others Haven’tFor starters, its CEO says she doesn’t think of

the company as a department storeBy Suzanne Kapner, The Wall Street Journal, October 30, 2018.

Department stores, once the go-to destination for the shopping needs of the entire family, have been un-der assault as buying has shifted online and to more value-oriented chains such as Walmart Inc. and T.J. Maxx.

While other types of retailers, in-cluding Best Buy Co. and Target Corp., have pivoted enough to sur-vive the retail crisis of recent years, in which dozens of chains went un-der and hundreds of stores closed, department stores have been slower to change.

Sears Holdings Corp. and Bon-Ton Stores Inc., two venerable depart-ment stores that dominated their markets for much of the past centu-ry, filed for bankruptcy protection this year. Others are struggling to stay relevant, including J.C. Pen-ney Co., which is on its third chief executive in seven years as it has ca-reened from one strategy to another.

Kohl’s Corp., by contrast, is sur-viving the onslaught better than many of its peers. It has tried to do things differently, including strik-ing a controversial partnership with Amazon.com Inc. and teaming with social-media platform PopSugar Inc. to design a line of clothes. The result has been a string of strong sales.

Chief Executive Michelle Gass, a 50-year-old former Starbucks Corp. executive who took the helm of Kohl’s in May after joining the

company in 2013, spoke to The Wall Street Journal about the changing retail market and what Kohl’s is doing to stay ahead of the competi-tion. Edited excerpts follow.

WSJ: Why do you think Kohl’s is having success when so many other retailers, especially department stores, are struggling?

MS. GASS: We don’t think of our-selves as a department store. We aren’t in malls. Our stores have a racetrack design, which makes them easy to navigate. The cash registers are at the front of the store, rather than dispersed in de-partments, which makes checkout easy to locate. From the early days, we created a model that is easier and more convenient for shoppers than a typical department store.

WSJ: You have more than 1,100 stores. Unlike other retailers, you haven’t had mass closings. Why is that?

MS. GASS: We haven’t faced the same pressure to close stores as other retailers have. The moves we are making to use our stores differ-ently are helping us to keep them relevant. We are making our stores smaller. We are looking at opportu-nities to lease out extra space. In Milwaukee, we are leasing space to Aldi [the supermarket chain]. We put up a wall. We’re reducing the inventory by double digits and as-sorting as a smaller store.

Embracing AmazonWSJ: Last year, you launched a partnership with Amazon.com. You’ve created dedicated depart-ments to showcase some Amazon electronic products such as Echo. And you are allowing shoppers to return purchases from Amazon at Kohl’s stores. Weren’t you nervous about getting in bed with a company that is upending the retail industry?

MS. GASS: There is a lot of space for both of us. In thinking about the partnership, it was how do we take Amazon’s dramatic customer base and combine it with Kohl’s physical stores to create value for both of us.

WSJ: How is it going so far?

MS. GASS: We now accept Ama-zon returns in 100 stores and have dedicated Amazon departments in 30 stores. Based on the volume of returns we are getting, people are using the service. What we are try-ing to determine is, of the people coming in and returning some-thing from Amazon, how many are c r o s s i n g continued on page 9

Michelle Gass


the aisle and buying something from Kohl’s?

‘Mindset of experimentation’WSJ: Depar tment stores tend to have an older customer base. What are you doing to reach young-er shoppers?

MS. GASS: That’s where PopSugar comes into play. It’s one of the most wide-reaching social-media proper-ties for millennial females. We were already advertising some of our brands on PopSugar. That told us they are reaching the customers we want to reach.

We designed and produced a cloth-ing collection with them. The first line is in stores now.

WSJ: How can you tell whether it’s resonating with younger shoppers?

MS. GASS: Thirty-five percent of the sales are online, which is much higher than our overall average.

WSJ: Another way department stores tend to get younger shop-pers is through their gift registry business. Yet, you chose to exit that business. Why?

MS. GASS: We weren’t creating a great customer experience, so I’d rather not be in the business. We’ll probably bring it back someday, but it will look a lot different. When you do things like that, it forces you to think about making a sea change versus an incremental change.

WSJ: Change can be hard for people in big organizations. How have you tried to get your team to embrace it?

MS. GASS: I tell them the most important thing is around innova-

tion and speed. Those that are too slow will be left behind. You aren’t always going to get it right, but you’ve got to be out there trying things and really have a mind-set of experimentation.

WSJ: With so many retailers disap-pearing—Toys “R” Us Inc. recently closed all its stores—where do you see opportunity to pick up market share this holiday season?

MS. GASS: We’re getting into the toy business in a bigger way. We added the Lego® and FAO Schwarz brands. With Bon-Ton not around, that store had a lot of overlap with Kohl’s. We plan to go after those customers.

Ms. Kapner is a reporter for The Wall Street Journal in New York. Email her at [email protected].

Kohl’s continued from page 8

GOOD NEWS FOR RETIREES!Seniors and other Americans receiving Social Se-curity will see the largest increase to their benefits since 2012, and for the first time in years it won’t be largely consumed by higher health-care costs.

The 2019 cost-of-living Social Security increase will be 2.8 percent, which translates into an av-erage increase in retiree benefits of about $40 a month. More than 62 million Americans receive Social Security benefits, most of them retirees.

The cost-of-living adjustment, based on a formula that reflects changes in consumer prices, will be the largest for the monthly pay-ments since a 3.6 percent increase in 2012. In 2018, the increase was 2.0 percent.

The gains come after no change to benefit pay-ments in 2016 and a 0.3 percent increase in 2017.

Meanwhile, the pace of price increases for medical care has eased since 2016 and is growing in recent months at a slower rate than overall inflation. Medicare costs are also expected to stay in check next year.

Mnuchin Must Stand down from Sears Matters, Senators Say

Three democrats on the Senate Finance Committee are de-manding Treasury Secretary Steven Mnuchin to formally recuse himself from any matters before the Pension Benefit Guaranty Corp. (PBGC) related to Sears Holding Co., where he was once a board member. They said, “Anything short of full recusal will present a significant conflict of interest and risk bias in any PBGC decisions and actions.”

Senators Bob Menendez, D-N.J.; Sherrod Brown, D-Ohio and Ron Wyden, D-Ore. and the ranking Democrat on the panel, made the demand in a letter to Mnuchin on October 19.

Mnuchin sits on the board of the federal PBGC, which considers applications from companies to terminate their pension plans, and it pays retirees, at least in part, if the employer defaults.

The agency is listed among the biggest unsecured creditors of bankrupt Sears. Mnuchin promised in his confirmation hearing to recuse himself from any Sears’s matters that came before the pension board.

The senators said Mnuchin and Eddy Lampert were college roommates and close friends, with Lampert attending the confirmation hearing and sitting in seats reserved for fam-ily and friends.


Cmdr. Vernon (Vern) F. Vikingson, USN Rtd.December 9, 1925—July 1, 2018

Vern grew up in Minneapolis. He joined Sears and worked part time while attending university in Seattle, Washington, in 1946 with the Navy ROTC officer candidate program. It was there he met his future wife Gloria. They were mar-ried in 1951.

After completion of his Naval full-time service, he resumed his employment with Sears full time while continuing to be in the U.S. Navy active reserves, eventually moving to Chicago and residing in Glenview, Illinois, with his wife Gloria.

At Sears he moved up the corpo-rate ladder from clerk to become senior buyer of men’s clothing which involved worldwide travel.

His Navy Reserve career continued at The Great Lakes Naval Station where he continued to serve attaining the rank of commander, retiring from the Navy in 1985.

He retired from Sears in 1989 after logging over 45 years of service. Vern and Glo-ria enjoyed travel and volunteer pursuits. They had no children but were close to other family members, nieces and nephews in the Midwest.

In 1993 Vern became a member of a group of Sears’s retirees under the banner of SEAR’S RETIREE VOLUNTEERS, logo SRV. This group volunteered as a group until

2012 when funds ran out, and the membership shrunk by reason of age, deaths and ill health.

The volunteer activities were fo-cused on mentoring in Chicago schools, initially the Gregory school, on the West Side, near Homan and Arthington and later for over 15 years at the Corkery school at West 25th Street.

Every Thanksgiving SRV MEM-BERS assembled and delivered Thanksgiving Meals (baskets) for needy families of children attend-ing Corkery Elementary school. The funds had been donated by Sears when Ed Brennan was CEO.

Another major charity involved working with the Chicago Food Depository every Saturday.

Vern was a conscientious leader, always mild man-nered and quick with a smile. Those of us who volunteered with him and met for an occasional lunch when SRV ceased operations miss him and Gloria who passed away two years prior to Vern.

After Gloria passed away and Vern was in his 90th year, he took a 6,000-mile driving tour across the United States visiting old haunts, then a European River cruise; he was accompanied by a nephew-in-law. That speaks of the measure of the man. Two days before he passed away, while recovering from a near fatal heart attack he was up and about planning his next escapade.

Back Row: Bill Barker, Joan Munson, Vern Vikingson; Front Row: Tom & Lucy Keevil


N.A.R.S.E. NEEDS YOU!No one knows whether Sears’s bankruptcy reor-ganization will be successful. Whatever happens, N.A.R.S.E. will keep you informed. And whatever Sears tell us, we will tell you.

However we can only continue to communicate to you through your financial support. What will hap-pen to your life insurance if Sears liquidates? We will tell you.

This issue of Straight Talk could not be printed and mailed to you without your continued financial support and the support of many others.

As your chairman, I am asking you to renew your N.A.R.S.E. membership for 2019. Enclosed is your Membership/Renewal Application form and mailing envelope. If you have already renewed for next year, then please pass the application form to someone who would be interested in supporting our organization.

We wish you a Happy Thanksgiving, a very Merry Christmas and Happy Holidays to everyone, and the best wishes for Sears Holdings and all of us in 2019!

Ron Olbrysh, N.A.R.S.E. Chairman

LAMPERT COMING TO GRIPS WITH FAILUREIn an interview with The New York Times shortly after the announcement of Sears filing for bankruptcy protec-tion, Chairman Edward Lampert said, “I’ve taken a huge personal hit. Not just in money, but time. There’s been an enormous opportunity cost.”

He went on to state that by 2009, he realized that nothing less than a radical transformation of Sears’s culture would allow it to keep up with the digital revolution that was transforming the retail industry. That year, Lampert launched the company’s “Shop Your Way” cam-paign as the cornerstone of the new data-driven and customer-focused strategy to compete with Amazon.

Lampert admitted that he didn’t pick the best executives to fully embrace the company’s digital make over. “I underestimated how difficult it is to do and how critical are the right people to lead and to get people to buy in,” he said.

In something not well publicized, Lampert cited his attempt to con-vert underutilized space in the stores into internet lounges, which offered customers free Wi-Fi and a

place to relax. It was an attempt to get customers, many of whom didn’t have internet access at home at the time, into stores, much as Star-bucks had attracted laptop-toting coffee drinkers.

This proposal went totally con-trary to traditional retailers, who measured success strictly in terms of sales per square foot and for whom any space not dedicated to merchandise was a waste. None-theless, the computer-equipped internet lounges were rolled out in 100 Sears’s locations—but in a halfhearted manner.

“I’d visit a store, and there’d be 10 computers,” Lampert recalled. “Half of them wouldn’t work.” The lounges were abandoned. “We didn’t have store leaders or a C.E.O. at the time who embraced the idea,” Lampert said.

In 2013. Lampert himself became CEO of Sears, something he said he had never aspired to. He expected to stay in that role only a few months. “I wanted to be an idea generator,” he said. “I was trying to be a cata-lyst, not the operating person.”

However, by then it was too late. Caught in a spiral of declining sales, huge losses, store closings, forced asset sales and relentless competition from online rivals, Sears struggled for its day-to-day existence, a war of attrition that ended with Sears filing for bank-ruptcy protection.

The interviewer, Mr. James B. Stew-art said that Mr. Lampert “ … will likely emerge from the Sears col-lapse with many more assets than most people realize. He owns lavish homes in Greenwich, Connecticut, and Indian Creek, Florida, just off Miami Beach. But he no lon-ger makes the cut for Forbe’s 400 richest Americans. His net worth has plunged by $3 billion since peaking at $4.5 billion in 2007, the magazine estimates. At Sears, all of his compensation was in stock. He never sold a share. The stock is now all but worthless.”

Editor’s Note: This article was edited from Mr. James B. Stewart’s interview with Edward Lampert ap-pearing in The New York Times on October 18, 2018

12

Hey Sears—Whirlpool Wants Its Appliances Back!

The Benton Harbor, Michigan-based home appliance manufacturer Whirlpool wants its inventory back from now-bankrupt Sears Holdings.

Sears listed Whirlpool as one of its largest unsecured creditors in its bankruptcy filing, saying it owed the appliance maker $23.4 million.

Whirlpool, which makes washing machines, refrigerators and dish washers, among other appliances, sent a letter to Sears last month asking that the retailer return items it had received from Whirl-pool in the 45 days leading up to its October 15 bankruptcy filing, according to The New York Post.

In a letter filed in court following Sears’s bankruptcy, Whirlpool’s attorney demanded that Sears “refrain from selling, disposing or using … for any purpose whatso-ever” the merchandise it received from the appliance-maker during that time without permission from

the U.S. Bankruptcy Court.

Whirlpool argued that Sears was in-solvent when it ordered the goods and therefore has no legal right to them.

Whirlpool did not have a comment on the report. A spokesperson for Sears also declined to comment.

However, in a press release earlier in October, Whirlpool said it expected Sears’s bankruptcy to have “a very limited impact” on its operations, adding that as of September 30, only 1 percent of the company’s aggre-gate accounts receivable exposure was related to Sears. Whirlpool’s net sa les to Sears comprised less than 2 percent of its global sales, the manufacturer wrote.

Whirlpool added that it does not expect Sears’s bankruptcy to ma-terially impact its financial results over the long term. After past dis-ruptions to its distribution network, Whirlpool has been able to offset po-

tential declines through increased sales elsewhere, the company said.

The bankruptcy code gives compa-nies who sent products to a buyer on credit shortly before a bank-ruptcy filing the right to reclaim those goods, as long as the specific items can be identified.

It’s common to see those claims in retail bankruptcy cases, said Daniel Lowenthal, partner at Patterson, Belknap, Webb & Tyler and chair of the New York firm’s business reorgani-zation and creditors’ rights practice.

It’s not clear whether Whirlpool and other companies will be successful, since it’s difficult to send goods back once they’ve made it to the buyer’s warehouse or sales floor, said Neil Stern, senior partner at Chicago-based consulting firm McMillan Doolittle.

“It certainly doesn’t help Sears” in its efforts to reorganize and keep stores going, he said.

OCTOBER 15, 2018—THE DAY OF RECKONING FINALLY ARRIVED...

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