Is this the end of Sears?
It’s the question on everyone’s mind who is keeping up the current news from the retail giant that has been in business for more than 130 years. It started with the closing of stores across the United States and the sale of real property to give the company the opportunity to regroup.
Earlier this year, news hit that Stanley Black & Decker and Sears reached an agreement to purchase the Craftsman brand and bring it under the umbrella of SBD. That deal, by the way, can be undone if Sears is found to have been insolvent at the time of the deal. However, Stanley Black & Decker is confident that the deal will proceed as planned and there are no indications to believe otherwise.
Check out the Details of the Craftsman Deal
A Changing Retail Landscape
Sears began as a mail order catalog company in 1886 by Richard Warren Sears and Alvah Curtis Roebuck. By 1925, Sears was opening its first retail stores. Growing up in the 1980s, I still remember looking through the Sears catalog in the weeks before Christmas, circling the toys I wanted and dog-earing the pages in hopes that Mom and Dad would ensure Santa got the message.
That nostalgia has worn off thanks to the Internet age. In 2005, Kmart – fresh off its emergence from bankruptcy – purchased Sears and renamed itself Sears Holdings. But the Internet train rolled on, leaving retail giants like Sears on its knees as companies like Amazon found ways to deliver goods straight to doorsteps and for a lower cost.
We’ve seen other companies attempt to reorganize themselves around internet sales. However, there just seems to be too much overhead in holding onto brick-and-mortar locations than is sustainable to compete against the new retail powerhouses.
Gone are the days when Mom would go to look at the latest kitchen, dining, and bedroom trends while Dad and I walked through aisles Craftsman tools and lawn equipment. It’s sad, really, when I think back to looking for the way my dad reacted as he picked up each of the tools. I would make a mental note of what really caught his attention before Mom and I would come back later to grab something we knew you’d love on Father’s Day, Christmas, or his birthday.
Now, we just scroll through thousands of options online and pick whoever has the lowest price with free shipping.
Is This the End of Sears, Really?
Before we hold a funeral service for Sears, it’s not over yet. The board will carefully consider their options and are legally bound to do what is in the best interest of their stockholders. However, language that includes “substantial doubt” about its ability to maintain operations in their latest filing is at the root of our most recent concerns.
Sears Holdings also added that they have a comeback plan to help stabilize the company and increase profits. The fourth quarter of 2016 saw losses that were less than originally predicted. The company is looking to lower its debt and reduce expenses by at least $1 billion. There’s also a plan in place to try and reduce pension obligations – which will not come as welcome news to Sears retirees.
We’ll have to wait and see if they can turn the ship around.
How Is Craftsman Affected?
As I said earlier, there is a small – but present – chance that the Stanley Black & Decker purchase of Craftsman might be undone. But we’ll avoid diving too deep into that unless there are indications that it’s in play.
More realistically, if this is the end of Sears, the burden of all of those lifetime warranties would either dissolve with the company or shift to Stanley Black & Decker. Early chatter indicates that it’s likely SBD would take on the burden if for no other reason than to maintain Craftsman’s reputation. It makes good sense if they intend to capitalize on the Craftsman name and continue producing new tools under it.
The Bottom Line
No one knows for sure if this really is the end of Sears. The indications aren’t good, but the board isn’t ready to throw in the towel yet. It looks like Sears is yet another victim of the Internet age where better prices and user comments are more valuable than putting the product in your hands and talking to a knowledgeable salesman. But as with any business, you have to adapt to the changing times if you want to remain relevant to each new generation. The innovative mail order catalog way of doing things in the late 1800’s doesn’t hold a candle to the internet sales of today.
