Oct 21, 2018

Low employee valuations can lead to bad bankruptcies

Expand chart
Data: FactSet; Chart: Andrew Witherspoon/Axios

Sears filed for bankruptcy this week, and its owner, Eddie Lampert, is warning employees that absent "material progress over the next few months," the fate of the company is going to be "a shutdown and liquidation."

The bottom line: There are good bankruptcies, which discharge legacy debts and allow the company to continue anew. And then there are bad bankruptcies, which cut off supply chains and result in outright liquidation. Bad bankruptcies inevitably result in thousands of job losses — and Sears is looking like it's going to be one of them.

The big picture: Sears hasn't made any visible "material progress" since Lampert took control of the company in 2005. The chances of it doing so now are slim.

  • Lampert is a master of financial engineering, but the way that this bankruptcy plays out is now largely out of his control.
  • Sears could easily go the way of Toys "R" Us: An outright liquidation, with tens of thousands of employees losing their jobs.

Worryingly, there are many other companies which are worth very little on the stock market but which have thousands of employees relying on them to make payroll every month.

  • JC Penney, another troubled retailer, has 98,000 employees and a market value of just $5,600 per employee. Pier 1 is worth only $7,000 per employee.
  • Netflix, by contrast, has a market capitalization of some $27 million per employee, with a workforce of 5,500.

Go deeper:

Go deeper

The rise of the home office

Source: IPUMS USA, Ruggles, et al. (2019); and St. Louis Fed; Chart: Axios Visuals

The U.S. economy is shifting inexorably away from manufacturing and towards services — and with that shift comes a rise in remote work.

By the numbers: St. Louis Fed researchers found that more than 3% of American employees primarily worked from home in 2017, up from 0.7% in 1980.

Go deeperArrowJan 9, 2020

Growing divide between the two Americas

Illustration: Aïda Amer/Axios

Life in the U.S. is increasingly divided into two realities — one in which things have almost never been better and another in which it's hard to imagine them being worse.

Driving the news: Bankruptcies led more companies to announce job cuts last year than at any time in more than a decade, WSJ's Aisha Al-Muslim reports (subscription), citing data from outplacement firm Challenger, Gray and Christmas.

Go deeperArrowJan 3, 2020

2019 stock market gains still leave Trump behind his predecessors

Data: FactSet; Chart: Axios Visuals

The S&P 500 has jumped 42% under President Trump — according to market data from the inauguration through 2019's final day of trading.

Why it matters: Trump uses the stock market's surge as a barometer of his presidency's success — one that, along with the 50-year low unemployment rate, he's sure to continue to tout as the 2020 election approaches — but the gains under him lag those under former Presidents Barack Obama, when stocks rebounded from the lows of the financial crisis, and George H.W. Bush.