If you believe Sears and Kmart are going to continue in business as sister chains, I've got a couple thousand Kmart signs to sell you.
Merging Sears, Roebuck and Co. and Kmart Holding Corp. and then maintaining two brands makes little sense -- even though that's what the people who put together the $11 billion merger are saying they plan to do.
Kmart Chairman Edward S. Lampert might have difficulty keeping the Sears and Kmart brands alive under one roof. Sears, however, could part with many valuable mall spots.
(Gregory Bull -- AP)
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As somebody who grew up in retailing -- my dad sold Big Smith overalls and Hart Schaffner & Marx suits in a small town, and I spent many years writing about the business -- I'm dubious about that and much else of what's been said about Kmart's plan to take over Sears.
For example, some people predict it will produce windfalls for Martha Stewart's company -- Kmart's best brand name -- as well as for Danaher, the Georgetown company that makes Sears's Craftsman hand tools and for Whirlpool, maker of Kenmore appliances. Shares of all three have jumped since the merger was announced Wednesday, based on the premise that the Kenmore and Martha brands will be sold at Sears and Craftsman at Kmart.
But cheap Chinese tools are what Kmart shoppers buy today, not Craftsman, which cost two or three times as much. Moving the Craftsman and especially Kenmore brands into Kmart risks cannibalizing their sales at Sears. And succeeding in appliances requires well-trained, well-paid sales people, a species foreign to Kmart.
If there is a Kmart.
Although Kmart is buying Sears, Sears Holding Corp. will be the name of the surviving company because it has a much better image, along with a coveted single-digit stock trading symbol -- S -- on the New York Stock Exchange.
The merger grew out of the Sears purchase of a batch of Kmart stores, and executives now are talking about converting "hundreds" of Kmarts into Sears stores.
The strategy is to move Sears out of malls, where it no longer belongs, and into Big Box Land, where Kmart has many locations that could generate far more sales and profits as free-standing Sears stores. That's a smart move. People don't go to the mall to shop and then drop into Sears to buy a stove. They go to Sears for appliances, and if spending hundred of dollars doesn't sate their shopping urge, then they wander around the mall. In fact Sears has trouble getting its Kenmore and Craftsman customers to shop for soft goods even in its own stores, let alone mosey through the adjacent malls.
The Sears store at Montgomery Mall, aka Westfield Shoppingtown Montgomery, is a prime example of a Sears store that could be put to better use. Sell that building to Macy's and the sales volume for that space would explode. The whole mall would enjoy higher traffic. It would take a total turnaround at Sears and years to make as much money out of that store as you could get by selling it as soon as possible.