Kmart/Sears: A Year Later

November 18, 2005 - 08:53

According to a Detroit News article, “One year after Troy-based Kmart Holding Corp. announced it would acquire Sears, Roebuck & Co. in a blockbuster $12.3 billion deal, the new company, called Sears Holdings Corp., is struggling, and the future of the Kmart name is in doubt.”

The article points out that neither Sears department stores nor Sears Essentials, the new format expected to drive the company’s off-mall growth, have added Kmart merchandise, including Kmart’s prime brands such as Martha Stewart Everyday. Sears does plan to introduce its private label brands such as Kenmore appliances and Craftsman tools into 50 Kmart stores by the end of the year, but there are no known plans to introduce Kmart merchandise into Sears stores. “The company also expects to open 50 Sears Essentials by the end of the year as part of a plan to convert 400 Kmart stores to the Sears Essentials concept,” reported the article.

The Detroit News interviewed Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment-banking firm in New York, N.Y., who said, “The Kmart brand name is gone. If you were going to keep a brand, you wouldn’t be closing more stores. (Sears) is going to milk this brand for everything that it’s worth, and then it’s going to disappear.”

When the merger was announced, company officials pledged to keep a “significant” corporate presence in Michigan, which the Detroit News points out hasn’t happened. “Hundreds of Kmart employees in Michigan have been transferred to Sears’ offices in Hoffman Estates, Ill., near Chicago, or to Dallas, according to SEC filings. Only a few hundred employees remain at Kmart’s massive headquarters building on Big Beaver Road in Troy,” the article stated.

Sears Holdings chairman Edward Lampert, who organized the deal, is still positive about the merger. “We continue to work on steps to make Sears Holdings more customer focused and more profitable in order to compete in the 21st century,” Lampert wrote in a letter to shareholders in September. “We intend to build on the historic strengths of both companies, while overcoming some of the more recent weaknesses.”

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