In a follow up to a recent story on the overall business structure of Sears, the company was in the headlines again on Thursday. The news of the official announcement of the sale of the Craftsman brand was made today to Stanley Black & Decker for an estimated $900 million.
I had reported weeks ago that this move was certainly possible and that Black & Decker was probably the best suitor for such a transaction. The sale of this iconic American brand of tools provides Sears with an infusion of capital at a time that it desperately needs cash. The company, as I wrote last week, needs about a billion dollars to stay in operation through 2017, some estimates have it as more like $1.5 or $1.6 billion which means that Sears has some more credit line borrowing to secure.
The detractors have been quick to jump into the discussion today and make projections that Sears will be in bankruptcy proceedings before the end of the year. In fact, this question was posed to the Stanley Black & Decker executives during the announcement of the Craftsman deal. They acknowledged that if Sears is in bankruptcy proceedings that will have a detrimental effect on the Craftsman purchase being fully completed.
In related news, Stanley Black & Decker also announced that they were planning to open a new factory at a site yet to be determined to manufacture the Craftsman products in America. The new factory would employ around 3,000 and would return an iconic American brand to being “made in the USA” after being made overseas for many years in the current scenario with Sears.
The potential bankruptcy of Sears is an added issue when consideration is given to the fact that those stores are the primary channel for sales of Craftsman tools and other products. The Stanley Black & Decker side explained that they plan on marketing Craftsman in many new channels and to distribute to new retail partners (Home Depot and Lowes jump to mind) to offset the loss of business from Sears in the short term.
Sears gains the injection of cash it needs but it sacrifices the sales revenue it would receive if they owned the brand, it is a real “catch 22” scenario for companies, who like Sears, also own the rights to other very recognizable brands. The retailer gets to the point in their life cycle where some hard decisions need to be made to save a sinking ship.
The announcement from Sears also came with a side note regarding some of their Kmart branded stores. Sears will be closing 41 of their store locations as well as 109 Kmart store locations will be shuttered. The company did not disclose how many jobs would be impacted by the closings, but most of them are part time positions which the company is still concerned about in their release today. The company acknowledged that the stores were underperforming for a long time but that they essentially kept them open to keep local jobs in those communities intact for as long as possible.
This news comes on the heels of Macy’s announcement yesterday of store closings and layoffs of thousands of employees. It is a sad time for some iconic American brands. The sale of the Craftsman brand was something I wrote about weeks ago as well as the potential sale of Kenmore and Die Hard, but Craftsman was always viewed by industry experts to be the most important of those three Sears brands.
The question then becomes: without Craftsman, is Sears really viable? The answer sadly is no, and the outlook for their survival past 2017 is pretty grim. The Sears stock did jump 5% today but they and many of their competitors are being devoured by Amazon. The terrain has changed and Sears may not be a part of it any longer.
The silver lining in this mess is that Craftsman products will live on and will be made in America in the years to come.