Sears' clearance sales will likely be full of steep discounts, but one key uncertainty could keep shoppers from biting (SHLD)
- Sears has filed for bankruptcy and said it is closing 142 stores before the end of the year.
- GlobalData Retail's Neil Saunders says it is wise for these stores to stay open for the holiday shopping season in order to clear out inventory, but he warns that customers may be turned off of the deals because of the uncertainty around warranties.
- Sears has long been a top seller of appliances in the United States, and many of those items come with warranties.
Sears has filed for Chapter 11 bankruptcy protection and announced it will close 142 stores. These stores will close by the end of the year, giving them the chance to tap into the holiday shopping season on their way out.
While holiday sales are a good time to clear out inventory, at least one analyst says that some customers might be turned off by the uncertainty around the retailer's warranties.
"Sears will still be running up a down escalator," Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients on Monday morning.
He continued: "Many consumers will now be nervous about buying bigger ticket items from the retailer for fear that it may not be around to back guarantees or fix problems come the new year."
Sears has long been known as one of the leading appliances sellers in the United States, and many of those products are sold with warranties.
Despite its past woes, Sears has said that it will honor these warranties.
"We are a leader in the service contracts industry and proudly stand behind our product," a Sears spokesman told Business Insider's Hayley Peterson last year. "Sears, as well as any other company that legally sells service contracts, is required to meet regulatory requirements designed to provide adequate resources to fulfill service contracts into the future. We will fulfill our commitment to our customers and members."
A spokesperson for the company did not immediately respond to Business Insider's request for comment on what will happen with its warranties now that it has filed for bankruptcy.
However, experts say the warranties could be dissolved.
"The warranties are going to be a huge issue," Lopez-Castro, a partner at the Florida-based law firm Kozyak Tropin & Throckmorton, told Business Insider on Friday, before Sears had filed for bankruptcy. "There's a real risk that they will not be honored."
She said gift cards and rewards points earned through Sears' Shop Your Way loyalty program could also be erased with the bankruptcy.
"I would advise customers to redeem their points now," she said.
As Sears has now filed for Chapter 11 bankruptcy protection, the fate of its warranties and rewards points will be decided in court. Sears has a lot of creditors to pay, so honoring outstanding warranties and loyalty points might become a lower priority.
Read more about Sears' downfall:
- Sears is shuttering 142 stores with liquidation sales starting immediately — here's the complete list of closing stores
- Sears, once the largest retailer in the world, has filed for bankruptcy and is closing 142 stores. Here's how it got there.
- Trump slams Sears leadership after bankruptcy filing, saying the company was 'obviously improperly run for many years'
- 'I've decided to step down as CEO': Eddie Lampert sends email to Sears employees after the company files for bankruptcy
- Sears' top spokesman jumps ship as reports emerge of a potential bankruptcy filing
Join the conversation about this story »
NOW WATCH: 7 outdoor adventures that are worth the hike