Sears Chairman Edward Lampert Makes Last-Minute Bid to Save Chain

Edward Lampert’s ESL Investments Inc. unveiled an offer to save a chunk ofSears Holdings Corp.’s SHLDQ -2.24% stores on Friday, but the retailer’s survival isn’t guaranteed.

Discussions about financing remain fluid, people familiar with the matter said. Other offers came from liquidation firms, other people familiar with the matter added.

An ESL spokesman said in a statement Friday that through an affiliate, Transform Holdco LLC, the firm submitted an offer for roughly 425 Sears stores, for a total value of $4.4 billion.

The offer is slightly lower and for fewer stores than ESL’s original bid earlier in December. ESL is a hedge fund run by Mr. Lampert, Sears’s chairman and former chief executive.

The bid includes a $1.3 billion financing commitment from three financial institutions, ESL said. The banks that agreed to extend the maturity on a $1 billion loan to beyond Sears’s bankruptcy include Bank of America Corp. andCitigroup Inc., people familiar with the matter said. ESL’s current bid also calls for ESL to forgive or extend maturities on most of Sears’s debt, according to one of the people.

By Jan. 4, Sears’s advisers will evaluate whether ESL and other bids are deemed qualified to proceed to an auction scheduled for mid-January.

As part of the financing package, ESL and Cyrus Capital Partners LP are giving Sears a new loan of over $200 million backed by some Sears properties, one of the people said.

Liquidation firms Tiger Capital Group LLC and Great American Group LLC teamed up to place a liquidation bid, with the option of joining with other liquidation firms, people familiar with the matter said. Meanwhile, Gordon Brothers Retail Partners LLC and Hilco Global Merchant Resources LLC joined forces in another bid, the people said.

All four liquidation firms had teamed up to liquidate all Toys “R” Us Inc. stores in the U.S. earlier this year, and took part in the liquidation of Sears Canada.

Earlier in December, bids of interest were due for Sears. At the time, ESL made an indicative offer, as did the liquidator groups.

During a Dec. 18 hearing, the Sears attorney said multiple bids had already been received, including offers from liquidation firms to close some or all of the stores, as well as bids for specific divisions or assets, rather than the chain as a whole.

The early December offer from ESL had included the forgiveness of $1.8 billion of debt and $1.1 billion of assumed liabilities it is owed by Sears. ESL is Sears’s largest shareholder and creditor.

The bid received criticism from some of Sears’s unsecured creditors, which took issue not only with the so-called credit bid, but also with the provision that releases Mr. Lampert, his firm and others from future lawsuits related to their oversight of Sears before the bankruptcy filing.

When Sears sought bankruptcy protection in October, the retailer operated 687 Sears and Kmart stores.

Sears had identified 142 stores it would close immediately and another 40 to be shuttered later. A Sears attorney said during a recent hearing the retailer would seek approval to close another small group of stores.

Since the start of Sears’s bankruptcy process, Mr. Lampert’s ESL had said publicly it would submit an offer to keep the beleaguered chain alive.

Securities and Exchange Commission rules require that ESL’s offers must be made public due to Mr. Lampert’s ties to the company.

As part of the bankruptcy filing, Mr. Lampert stepped down from his role as CEO but remains chairman of Sears. Mr. Lampert put Sears and Kmart together in 2004, following the Kmart bankruptcy filing. At its peak, there were more than 2,300 Sears and Kmart locations.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com and Soma Biswas at soma.biswas@wsj.com

Lego Hits Brick Wall With Sales, Sheds 8% of Global Workforce

The Lego headquarters in Billund, Denmark. The toymaker’s growth has slowed since 2015. PHOTO:FABIAN BIMMER/REUTERS

By 

Saabira Chaudhuri

Updated Sept. 5, 2017 7:30 p.m. ET

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The maker of Legos, long immune to the struggles weighing on other toy companies, reported its first sales drop in 13 years on Tuesday, betraying cracks in its strategy to compete against a rising array of digital distractions for children.

Lego AS, the Danish company built on a foundation of tiny plastic blocks, said it would lay off 8% of its workers and thin the ranks of decision makers to speed up product rollouts.

“The car has gone off the road and landed in a ditch and now we have to pull it out and get it back up to speed again,” said Jørgen Vig Knudstorp, chairman of Lego Brand Group, in an interview.

In some ways, the sales drop is a result of Lego’s own success.

Its current structure was created to cope with double-digit sales growth, but the company says it now has too many layers and overlapping business functions, making it tougher to implement marketing strategies, slower to react to trends and disconnected from retailers.

“We have built an increasingly complex organization, an organization that is complex to a degree that makes it difficult for us to realize the growth potential we have,” said Mr. Knudstorp, who served as Lego’s CEO until the end of last year.

To turn sales around, Lego last month named Niels B. Christiansen, the 51-year-old former boss of Danish industrial group Danfoss AS, as its new CEO, succeeding Bali Padda, a Lego executive for 15 years who had been its chief operating officer before taking the CEO job.

Like Mattel Inc. MAT -1.64% and other toy makers, Lego is being buffeted by a host of new rivals for children’s attention, including playing videogames and watching YouTube videos. In response, the industry has tried to modernize toys for the digital age: Lego has rolled out its own videogames based on its plastic bricks as well as a set of programmable robots.

The shift, however, hasn’t come fast enough to counter eroding sales of more traditional toy lines. Lego said Tuesday its overall sales for the six months to June 30 fell 5% from a year earlier. In July, Mattel said its half-year sales fell 6.4%.

One bright spot for Lego: Tuesday’s half-year sales of 14.9 billion Danish kroner ($2.38 billion) pushed it above rival Mattel, which in July reported half-year sales of $1.71 billion. Sales were above the $1.82 billion Hasbro reported for its first half. But Lego’s net profit has slipped to 3.4 billion kroner from 3.5 billion kroner a year earlier.

Meanwhile, Mattel has cut its dividend to free up cash and revitalize its approach to toy development. Newly installed Chief Executive Margo Georgiadis, a former Google executive, said the U.S. company needed “to adapt” to the modern world. She said she wanted all of Mattel’s key brands, like Barbie and Hot Wheels, to include not just physical toys, but also video content and gaming components.

Lego has in some ways been ahead of the curve in efforts to experiment digitally, even as it has promised to remain committed to its physical brick sets. Following the launch of its Chima toy line in 2013, for instance, it introduced related online games, videos and a TV series. It has created Lego Boost, a robot-building kit that combines computer coding with elements of physical construction. And in February, the company launched an app-based social network—promising strict moderation and privacy controls—that lets children share their Lego creations.

Digital offerings aren’t threatening to wipe out physical toys anytime soon. Kids “are still reading books, still using Legos, people are making a place for physical toys,” said Judy Ishayik, owner of Mary Arnold Toys, an independent toy shop in Manhattan. But, she said, “there’s more dual play,” where physical toys are paired with a digital component.

She pointed to Crayola, owned by Hallmark Cards Inc., which rolled out an app that turns coloring-book creations into animated online representations. Hasbro Inc.’s Love2Learn Elmo app provides children with a way of interacting verbally with their Elmo dolls.

Play on touch-screen devices outranks all other kinds of play in frequency—including with blocks, board games and puzzles—according to a 2014 survey by New York research firm Michael Cohen Group of 350 parents with children age 12 and under.

The shift underscores the challenge for Mr. Christiansen, who takes the reins next month. In his nine years heading Danfoss, Mr. Christiansen is credited with making operations more efficient and agile, and investing in research and development as well as digital capabilities. At Lego, he takes over from Mr. Padda, who will have been in the job just nine months.

On Tuesday, Lego said it would cut roughly 1,400 jobs, with between 500 to 600 of these coming from its Billund, Denmark, headquarters alone. It is also working to reduce layers of management and administration to speed product rollout, which Mr. Knudstorp said can involve 20 teams on average before a product is ready for global launch.

“We are simply not executing well enough on our activities across the business, on product development, marketing, sales,” said Mr. Knudstorp, who as chairman of Lego Brand Group oversees the Kirk Kristiansen family’s 75% stake in Lego, as well as its interests in Legoland theme parks and an education business.

It could be a couple of years before the changes yield results, warned Mr. Knudstorp while declining to specify whether he expects Lego to return to sales growth this year or even next. Lego previously said a big marketing push in the U.S. had failed to pay off, and on Tuesday said its U.S. sales had declined in the first half.

Lego’s results sent tremors through the toy industry. Shares of Mattel were down 1.5% and Hasbro stock was off nearly 3% in New York.

Some of Lego’s recent woes are because toys tied to movies have underperformed retailers’ and manufacturers’ expectations. Lego products tied to last year’s “Star Wars” movie, “Rogue One,” didn’t generate the same excitement as had the prior installment, “The Force Awakens,” which was the first “Star Wars” movie in a decade.

SOURCE: THE COMPANY

Another big bet that didn’t fully deliver: the company’s second movie based on its toys, called “Lego Batman.”

Toys “R” Us Inc. said toys tied to the movie missed sales goals, even though Lego spent heavily to try to boost interest. “It didn’t manifest itself into the kind of sales momentum that we expected or they expected,” Toys “R” Us CEO David Brandon said in June.

Mr. Knudstorp, who served as CEO from 2004 until the end of 2016, acknowledged his share of the blame for the recent troubles.

A former kindergarten teacher and McKinsey consultant, Mr. Knudstorp was the first person outside Lego’s controlling family to lead the company. He took over after Lego sales had slowed sharply and heavy debt threatened bankruptcy.

He refocused the company on its iconic brick sets, and scaled back on the array of watches, clothing, dolls and other merchandise the company had rolled out. Initially, he also cut jobs, outsourced manufacturing and simplified the management structure. All that buoyed sales, giving Lego double-digit growth for more than a decade.

More recently, though, he boosted staff to keep up with resurgent demand—and the expectation that it would continue to boom. Between 2012 and 2016, Lego added 7,000 new employees.

“This investment has not materialized into a good harvest,” he said. “We have clearly built too large an organization and we need to make it smaller.”

Source : WSJ

Chevron CEO John Watson to Step Down

Chevron Corp. Chief Executive John Watson is planning to step down as the energy giant seeks new leadership for a changing oil world, according to people familiar with the matter.

The transition is expected to be announced next month, although Mr. Watson’s successor hasn’t yet been finalized by the board and plans could change, the people said. Mr. Watson isn’t expected to depart immediately and is likely to remain after the announcement for an orderly transition, the people said.

His likely departure underscores the dramatic shift under way at big oil companies as they adapt to a prolonged period of lower prices brought about by the U.S. shale boom. While the companies once favored swashbuckling leaders who bet billions on megamergers and pricey projects in far-flung regions, many are now turning to executives adept at squeezing every last dollar from a barrel through refining, and shorter-term investments that turn a profit faster.

The leading candidate to succeed Mr. Watson, 60, is Michael Wirth, 56, a refining specialist who earlier this year was elevated to the position of vice chairman at the oil company, the second largest in the U.S. behind Exxon MobilCorp. , the people said.

Chevron directors see Mr. Wirth’s years of experience wringing costs out of big plants that process fuel and chemicals as a critical need in a new era for oil markets defined by $50-a-barrel crude, the people said.

From the Archives

Chevron's John Watson on the Price of Oil

Chevron CEO John Watson shares his thoughts on the price of oil and where it’s headed, in a discussion with WSJ’s financial editor Dennis Berman at a WSJ Viewpoints breakfast event. (Originally published May 18, 2016)

From the Archives

Chevron's John Watson on the Morality of Oil

Chevron CEO John Watson shares his thoughts on public perception of the environmental impact of oil production. He spoke with WSJ’s Dennis Berman at a Viewpoints breakfast event. (Originally published May 18, 2016)

A Chevron spokesman declined to comment. Attempts to reach Mr. Watson on Tuesday weren’t successful.

Mr. Wirth’s ascent would mean four of the five largest public energy companies—including Exxon, Royal Dutch Shell PLC and Total SA —would be led by former refining specialists, a telling indication of transformation in oil markets. BPPLC’s Bob Dudley would be the last holdover from the time of $100-a-barrel crude.

The executive ranks have turned over at most big oil companies in the last four years. Former Exxon CEO Rex Tillerson retired to become the U.S. Secretary of State. Christophe de Margerie, the former CEO of France’s Total, died in a 2014 accident in Moscow. Shell’s leader Peter Voser retired at the end of 2013. All were replaced by former refining executives.

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The expected retirement of Mr. Watson, who has led Chevron since 2010, is taking place on amicable terms: He decided to step down well before Chevron’s mandatory retirement age of 65 years for executives to allow some of the company’s new leaders to flourish, the people said. His planned departure comes within the period that he had long outlined to the board, they added. Mr. Watson’s predecessor as chief executive, David O’Reilly, also retired years before turning 65.

“Big oil is turning toward very disciplined, returns-centric leaders who can manage razor-thin margins in disruptive, volatile markets,” said Les Csorba, who advises energy companies on CEO succession at executive search firmHeidrick & Struggles International , and wasn’t involved in Mr. Watson’s succession. “This is the answer for these companies as low prices continue.”In Mr. Watson’s seven-and-a-half years at the helm, Chevron’s shareholder returns—which include dividends—have increased by more than 80%. That performance has far outstripped that of peers such as Exxon and Shell in that time period, although it fell short of the advance by the S&P 500 index. He previously played a major role in managing Chevron’s absorption of Texaco Inc. in 2000 and served as the company’s chief financial officer. Mr. Watson’s tenure was defined by spending on an epic scale to build out projects all over the world as oil prices ballooned, including some in which costs far exceeded initial projections.

In Australia, two mammoth gas-export projects cost Chevron and its partners almost $90 billion, or $23 billion higher than initial projections, according to analyst estimates.

That spending was a sore spot for some investors, the people said, although many analysts over the years have come to see the projects in a favorable light because of how much cash they are expected to generate. Last year, investors came close to rejecting Mr. Watson’s compensation in a “say on pay” advisory vote. His overall compensation, including stock awards and pension changes, was $24.6 million in 2016, according to company filings.

Although the compensation measure ultimately passed with more than 50% of the vote, company officials and directors made an effort to meet with investors about their concerns and make changes.

After a number of pay reforms, including a provision that holds executives accountable for cost overruns, Chevron’s executive-compensation package for this year won the support of more than 93% of shareholders who cast ballots at its annual meeting in May.

Among major oil companies, Chevron also has by far the biggest position in the Permian basin in West Texas and New Mexico, among the busiest and most sought-after oil fields in the world.

Under Mr. Watson and production chief Jay Johnson, Chevron has moved to exploit the resource at a breakneck pace, a strategy that has been lauded by analysts.

The company’s land in the Permian may hold as much as 18 billion barrels of oil and gas, according to Houston energy investment bank Tudor Pickering Holt & Co.

Some had pushed Chevron to ramp up drilling sooner, but the company proceeded at a deliberate pace, seeking partners in an effort to understand how to maximize returns.

Mr. Watson, who earned a master’s in business administration at the University of Chicago business school, is a fan of free-market economist Milton Friedman and an unabashed believer in the importance of oil and gas in the world economy.

In interviews, he has extolled the virtues of cheap energy in alleviating poverty as more people around the world enter middle class. He has also expressed concerns about far-reaching interventions by governments to reduce warming temperatures, often making note of the potential costs to societies. His views on climate change aren’t believed to have played any role in his plans to step down, the people familiar with the matter said.

Mr. Wirth, a Chevron employee since 1982, is said to have views on climate change that are more in sync with those expressed by peers at Exxon, whose chief executive, Darren Woods, urged President Donald Trump not to withdraw from the Paris climate accords. The U.S. in June said it would withdraw from the accord.

Mr. Wirth oversaw the company’s refining and chemicals businesses for about a decade, ending in 2016. Since 2015, profit from that business unit have far outstripped any other operations even amid the price crash. It has booked more than $13 billion in profit in the last 10 quarters, even as the drilling and production business lost more than $2 billion.

Source : WSJ