US retail giant Sears has filed for Chapter 11 bankruptcy protection, buckling under its massive debt load and staggering losses.

The company began as a mail order catalogue in the 1880s, featuring items from bicycles to sewing machines to houses. It began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s.

Ruth Parrington, of the Chicago Public Library, studies early Sears Roebuck catalogues (AP)

But the onset of discounters like Walmart created challenges for Sears that have only grown and it faced even more competition from online sellers and appliance retailers like Lowe’s and Home Depot.

The operator of Sears and Kmart stores began to incur massive losses, joining a growing list of retailers that have filed for bankruptcy or liquidated in the last few years.

Sears Board Member
A Sears department store in Brooklyn, New York (Bebeto Matthews/AP)

Some like Payless ShoeSource have had success emerging from reorganisation in bankruptcy court but plenty of others have not, including Toys R Us and Bon-Ton Stores, both of which collapsed after a Chapter 11 filing.

“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, of retail consultancy Customer Growth Partners. “Hopefully, a smaller new Sears will be healthier.”

Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing landlords to its tens of thousands of workers.

The filing, ahead of the crucial Christmas shopping season, comes after rescue efforts engineered by chief executive and chairman Eddie Lampert have kept it outside the bankruptcy court — until now. Mr Lampert, the largest shareholder, has been loaning out his own money for years and has put together deals to prop up the company, which in turn has benefited his own ESL hedge fund.

The bankruptcy filing comes just before the crucial Christmas shopping period (Jim Mone/AP)

Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker following its earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands’ End.

In recent weeks, Mr Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets like Kenmore through his hedge fund as a 134 million US dollar debt repayment falls due on Monday. Mr Lampert personally owns 31% of the company’s shares. His hedge fund has an 18.5% stake, according to FactSet.

“It is all well and good to undertake financial engineering, but the company is in the business of retailing and without a clear retail plan, the firm simply has no reason to exist,” said Neil Saunders, managing director of GlobalData Retail, in a recent analyst note.

Edward Lampert, left, personally owns 31% of Sears shares (Gregory Bull/AP)

Sears’ stock has fallen from about 6 US dollars over the past year to below the minimum 1 US dollar level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around 141 US dollars. The company, which once had 350,000 workers, has seen its workforce shrink to fewer than 90,000 people as of earlier this year.

The company has racked up 6.26 billion US dollars in losses, excluding one-time events, since its last annual profit in 2010, according to Ken Perkins, who heads the research firm Retail Metrics LLC. It has had 11 years of straight annual drops in revenue. In its last fiscal year, it generated 16.7 billion US dollars in sales, down from more than 50 billion US dollars in 2008.

As of May, it had fewer than 900 stores, down from about 1,000 at the end of last year. The number of stores peaked in 2012 at 4,000, including its Sears Canada division that was later spun off.

A Sears store schedule for closure in Overland Park, Kansas (Charlie Riedel/AP)

In a March 2017 government filing, Sears said there was “substantial doubt” that it would be able to keep its doors open — but insisted its turnaround efforts would mitigate that risk.

But its losses continued into this year. In the fiscal second quarter ended August 4, net losses in the quarter swelled to 508 million US dollars compared with a loss of 250 million US dollars in the same quarter a year ago.

Such financial woes contrast with the promise that Mr Lampert made when he combined Sears and Kmart in 2005, two years after he helped bring Kmart out of bankruptcy. Back then, it operated 2,200 stores in total.

Mr Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with a loyalty program. But it struggled to get more people through the doors or to shop online.

Sales at the company’s established locations tumbled nearly 4% during its fiscal second quarter – an improvement from the same period a year ago when it fell 11.5%. Total revenue dropped 30% in the most recent quarter, hit by continued store closings.