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retail companies have sprouted one after the other over the last few decades showcasing their impressive lines in clothing footwear furniture and several other consumer goods retailers can easily attract customers into getting inside their stores however the rising demand in the industry is coupled with its rising competition retailers have it rough when competing in a saturated market that is easily influenced by the economic climate and consumer behavior that's why sears a popular department store chain in the u.s experienced significant fluctuations in their revenue and share prices in the last two decades knowing that the company stood as one of the largest retailers in the u.s bill ackman ceo and founder of pershing square capital management took the opportunity to purchase stocks of sears during their decline he believed that the company would appreciate substantially given the right turnaround strategies however things wouldn't go as smoothly as he'd hoped for the century-old retailer the men behind sears roebuck and company were richard warren sears a railroad station agent who sold watches and alva c roebuck a watch repairman before sears met his soon-to-be business partner he established the rw sears watch company a mail-order watch and jewelry business in 1886.
sears purchased his merchandise from a jeweler at a low price and sold them to his fellow station agents after three years he eventually sold the business and pursued a career as a rural banker however it was not long until he went back to retailing watches and jewelries together with his business partner roebuck they established another mail order firm under the name ac roebuck watch company in 1893.
by the next year the company expanded from watches and jewelry to other merchandise the watch company transitioned to sears roebuck and company which would later have the legal name of sears roebuck and co in the 1890s sears found an opportunity in selling mass-produced merchandise to small rural areas since their local general stores had a limited selection of goods and so the company decided to widen its product line their 300 page catalogs included clothing furniture groceries bicycles sewing machines and even automobiles of course consumers got hooked with the retailer's enormous product line which grew even bigger through the years there was a time that they even reached more than 500 pages for their catalog despite the mail-order business exceeding each preceding year's sales sears went on a standstill due to the impending recession in 1893.
this led roebuck to temporarily walk away from the company his share bought by julius rosenwald a clothing manufacturer in 1895. sears continued to offer their mail-order diversified product line during the 1900s people with little to no access for such products went rushing to buy from the catalog business not to mention prices were reasonable with the additional perk of free delivery in some areas the company's increasing popularity urged competitors to try out the same strategy however sears was already ahead of the game when the company entered an initial public offering ipo with a stock placement of 40 million dollars in 1906 they were able to expand operations by establishing their corporate headquarters with offices laboratories and operational spaces during this time sales were amounting to 50 million dollars annually as sears grew massively through the years they hit a few challenges one being the resignation of their president in 1908 and two being the severe depression from 1919 to 1921 with those challenges in place rosenwald the president and board chairman then managed the company's operations his actions of personally shelling out his wealth allowed sears to regain stability by 1922.
the company also expanded the mail order market to a physical department store in february 1925. they not only wanted to accommodate the rural areas but also establish a customer base in the urban ones after all urban consumers incur higher spending than those from the farms while the location of the first store wasn't in a highly concentrated area its success prompted sears to expand their locations and open several other stores in the u.s by 1931 in-store sales had exceeded those of mail order the company continued to flourish reaching a billion dollar sales in 1945 just after world war ii ended by 1973 they constructed the 110 story sears tower dubbed as the world's largest store aside from retail merchandise the company also offered financial services automobile repairs and real estate selling a few of their subsidiaries through the years it wasn't until the late 90s that the company was hit with major bumps like its growing competition home depot walmart and best buy a series of pricing scandals and the termination of their catalog business sears catalog business could have been a hit considering the increasing popularity of online shopping unfortunately the distribution cost for their mail order heavily affected their declining profit so they instead decided to terminate the service by 1999 sears lost the top spot in the dow coming in second from home depot after its 75 year run although the company managed to stay afloat it was far from its glory days by 2005 kmart holdings corporation purchased sears for 11 billion and transitioned it as the sears holding corporation however its decline continued despite the transformation in 2007 sears was in a tight spot as their share prices declined due to the economic climate fluctuating consumer behavior and decreasing demand for some consumer goods their state would make any investor wary of associating themselves with the company however it is during these times that bill ackman finds opportunity the activist investor is known for placing large sums on companies he believed are undervalued given that sears experienced a 195 dollar per share high in 2007 he anticipated that buying the stocks at the 125 mark was worth the gamble by october that year ackman purchased 5 million shares roughly worth 700 million dollars the news of akman's 3.5 stake in sears holdings urged several other investors to put their bets on the declining retailer after all ackman's public successes with other companies can be a convincing argument that the undervalued sears can make a turnaround in the market and so shares of the company rose by 2.3 percent after the news unfortunately for ackman he won't be able to play an active role in the company's management his 3.5 stake is insignificant compared to the 46 stake of eddie lampert founder of the private investment company rbs partners and chairman of the board of directors of sears ackman couldn't pressure the board into doing his turnaround strategies something he is popularly known in basically instead of a number of shareholders providing critical input on the board of directors the final say goes to the shareholder with the majority stake and the top position in the board the problem with this setup is not every decision made by the highest shareholder will turn out great another perspective is needed in order for sears to stay in the game despite ackman trying to voice his plans and getting them turned down he stayed with the declining retailer stock prices kept dropping due to the poor capital allocation and the rising competition of sears both of which being a reflection of the management the company's future continued to look bleak as ackman's plans weren't implemented by the latter half of 2008 sears experienced its steepest historical decline from the 70 mark in september to 25 in november it was during this time that ackman felt the need to stray away from the company if he can't influence the board into trying out his plans then he's better off dropping his shares in the company by the third quarter of the year ackman sold the majority of his seer stake in line with this ackman was also able to sell his 17.3 stake in sears canada to lampert's sears holdings in april 2010 the negotiation between the two companies lasted for four years with lampert initially offering to pay 16 per share in 2006.
however as shareholders of sears canada found the bid unreasonable the buyback stretched for a long time with ackman leading the shareholder side finally in 2010 sears holdings acquired about 90.4 percent of sears canada when they offered to pay cad 30 per share canadian dollars from this ackman received about 560 million dollars for his 18.7 million shares of sears canada ackman's decision to depart from sears turned out to be a smart one by 2012 sears canada stocks were at twelve dollars per share and by october 2018 the once prominent major retailer filed for bankruptcy sears shares currently cost less than a dollar you could say that even if ackman experienced major losses with sears he still managed to dodge the failed turnaround of the company do you think sears had a chance in making a comeback if ackman was able to influence the company's management let us know in the comment section below and if you're new to the channel don't forget to leave a like and subscribe you
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