Sears, which practically invented the department store and mail order business, has been struggling to compete with the rise of online retailers like Amazon and others. But last week, in a last gasp effort to keep the company going, the 100+-year-old retailer was forced to divest itself its Craftsman line of tools.
Sears Holding Company, which also owns the Kmart discount chain, announced Jan. 5 that its Craftsman brand would be sold to tool competitor Stanley for a reported $775 million. The deal, which has been rumored to be in the works since last year, allows Sears to continue selling Craftsman products royalty-free for the next 15 years.
In all, the deal could give a much-needed cash infusion of about $1 billion, according to industry analysts.
Store Closings Announced
In addition, Sears announced that it will close an additional 108 of its lowest-performing Kmart stores and 42 Sears stores, including three in Illinois.
The company also will try to raise an additional $1 billion by taking a $500 million loan, putting up $800 billion in real estate as collateral, as well as taking a standby letter of credit worth an additional $500 million.
So far, the company hasn’t sold off its two other hugely popular brands: Kenmore appliances and Die Hard-branded automotive batteries, shoes, and other products.
Sears is hoping its big bet will pay off in the long run as the company figures out how to navigate the changing waters of the retail business in the 21st Century, according to Sears CEO and chairman Edward Lampert.
“We are taking strong, decisive actions today to stabilize the company and improve our financial flexibility in what remains a challenging retail environment,” Lampert said in a news release announcing the latest moves. “We are committed to improving short-term operating performance in order to achieve our long-term transformation.”
Changing Dynamics
As cutting edge companies like Amazon figure out innovative new ways to get products to customers faster — including pilotless drones that can deliver packages to people’s doorsteps with 30 minutes of their clicking on the “Buy Now” button — Sears has been slow to adapt to retail’s shift towards automation and interconnectivity.
Recently, however, Sears has responded by offering its loyal customers discounts and rewards through its “Shop Your Way” membership program, which integrates online shopping with in-store purchases.
“Going forward, Sears will be more focused on our Shop Your Way membership platform, a network with tens of millions of active members, and our Integrated Retail strategy in order to be a more nimble, innovative and relevant retailer that is better able to provide value and convenience to our customers,” Lampert said. “We are confident that concentrating these key initiatives will lay the foundation for growth over the long-term.”