Terrible holiday sales, a
major reorg last week, and now the CEO is
out.
Recent events at Sears Holdings Corp. have renewed speculation
that hedge funder Eddie Lampert, the would-be Buffett who combined
Kmart with Sears in 2004, may be contemplating major asset sales. Most
of the talk has focused on the company's real estate,
though analysts are quick to note that the real estate is
worth far less than it would have been when the commercial property
market was healthier a few years back.
But what about those premier brands -- especially Craftsman tools,
Kenmore appliances and Diehard auto batteries? What does the reorg mean
for them? How much of their value comes from the brand itself, and how
much from a deteriorating distribution channel? And (come to think of
it) what exactly do these brands consist of, anyway?
The products marketed under these famous names are made for Sears by
multiple manufacturers, some well known and some less so. Whirlpool
Corp. makes many Kenmore appliances; Johnson Controls Inc. makes
Diehard; Danaher Corp. makes some Craftsman tools (as do Donwei
Machinery Industry Co. Ltd. in Taiwan and Fastenal Co. in Minnesota).
It may be worth noting that several of these companies have deep
experience in M&A.
Brands will be one of the five units of a new, decentralized Sears,
which opens up a couple possibilities. One would seem to be making
the brands available through other retailers. Lampert took a step down
this path by selling Craftsman tools in Kmart, apparently without
much success so far. But if Lowe's Cos. retails Craftman tools (just to
pick an example), what does that mean for Sears, which some people
think should quit selling clothes and concentrate on harder
goods?
Alternatively, if Kmart disappears and the number of Sears is cut in
half, can you get full value from these stellar brands through a
smaller distribution channel?
No doubt we'll be hearing more about this as the Sears story
develops. But given the prominence of these labels (Craftsman, for
example, consistently ranks among the very top consumer brands), it
seems a good bet that corporate development teams at more than a few
retailers and manufacturers are studying the matter. - Kenneth Klee
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Cuong Viet Do
And the winners are...
Certainly there can be some interests in being the only seller of a givne product brand but it has limitations. For example Apple computer sells in other non apple stores, palm is closing down theirs, you can get dell computers in staples...sometimes it can be different to sell the brand rather than the store itself.
It's getting less and less attractive though to imply that someone that a brand has worth. Sears used to sell and make everything domestically but now....