An elderly woman walks outside a Sears retail store scheduled to be shut down in north DallasSears, Dallas, USA - 23 Mar 2017

Wednesday kicked off day two of the heated Sears bankruptcy hearing.

At stake are the remains of America’s iconic retailer, once the largest in the nation.

Edward S. Lampert and his hedge fund ESL Investments won the bid for the insolvent retailer in January, arguing that saving Sears would also save tens of thousands of dollars. But creditors countered, saying Lampert and ESL are only acting in their own best interests and asked the courts to order immediate liquidation.  

Judge Robert Drain will make the final decision in a New York bankruptcy court as early as this week.

Wednesday’s session moved a little bit closer to a resolution, but extended the hearing for at least one more day.

The burning question was how many jobs will be lost if Sears liquidates?

A financial adviser for the Unsecured Creditors Committee argued that middle-management “white collar” Sears workers will suffer the most because they will have the hardest time finding new jobs. Meanwhile, with the current tight economy, sales associates will likely find new employment in a matter of weeks.

“You haven’t analyzed how many of those people live paycheck-to-paycheck?,” Judge Drain shot back. “Or, you don’t care?”

Lampert has continually claimed that his $5.2 billion bid will save roughly 45,000 jobs and about 425 stores operating under the Sears and Kmart nameplates around the country.

But creditors pointed out that Lampert’s current business plan would involve closing more stores — a plan that would result in even more job losses.

Kunal Kamlani, president of ESL and a member of the Sears Holdings Corp. board, testified that closing “dark stores,” or stores that are not in use, as well as five distributions centers, will help the new Sears company generate about $250 million in the first year of operation.  

That money, Kamlani said, will be reinvested to “help grow the ecosystem and employ more people.”

Creditors weren’t buying it.

In a Jan. 28 complaint, the Unsecured Creditors Committee argued that Lampert and ESL’s business plan was “confusing and inadequate from the start,” and only designed to “enrich themselves.”

They asked a judge to reject the bid and order liquidation.

“I wish it was that simple, but it’s not,” Kamlani countered under oath.

He said the number of stores open at the end of the year depends on “many other factors, as well as how many stores are open” — although ESL’s business plan submitted at the auction did not mention the possibility of opening new stores.

Seritage Growth Properties bought 235 Sears and Kmart-branded stores in 2015 for $2.7 billion.

Kamlani couldn’t say how many stores would still be open at the end of 2019, but said of the 20 to 25 properties in the real estate group’s portfolio that are slated to close in the coming year, only about “three, maybe four” are stores in the 425 remaining Sears and Kmart footprint.

“With this new company, if we’re successful, and we’re in the business of taking risks, we should be employing more than 45,000 people,” Kamlani said.

The department store, which had roughly 3,770 stores and more than 300,000 employees at its peak in 2006, had dwindled to just under 700 stores and around 69,000 employees when it filed for Chapter 11 bankruptcy Oct. 15. Since then the footprint has shrunk to about 425 stores. Revenues have fallen, too: from $53 billion in 2006 to just $16.7 billion in 2018.

Mohsin Meghji, who was appointed restructuring chief of Sears after Lampert resigned as ceo in October, also testified in defense of Lampert and ESL. Others said having a smaller store footprint would make the remaining stores more profitable, because it would give stores the chance to focus on buying the right products, instead of leaving larger stores “starving” for merchandise.

Even so, if the deal is approved at $5.2 billion — up from the originally proposed $4.4 billion — creditors have argued that Lampert might still be getting a deal. 

Mark Cohen, former ceo of Sears Canada, said Lampert’s deal only delays the inevitable.

“Those 50,000 people are going to lose their jobs anyway,” he said. “Nothing will change. He’s just going to run the clock out on what’s left of this company for his own benefit.”

Cohen called Lampert’s declaration to save jobs “an egregious lie,” and pointed out that in Lampert’s 14-year stint at Sears, employment fell from around 300,000 workers to roughly 69,000. Vendors like Whirlpool also cut ties with Sears along the way.

He also pointed toward Lampert’s lack of retail experience as part of the retailer’s downfall.

“He’s a hedge fund guy,” Cohen said. “Organizations that fail always have failed leadership.”

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