1+1 = ?

Carole Sloan, November 29, 2004

Well, it happened. The proposed acquisition of Sears by Kmart and the merging of the companies into Sears Holdings has perplexed many in the financial community as well as leaders in the merchandise areas where the retailers are involved.

And home textiles is a major player in the various businesses under the two retailers' banners. In aggregate, they add up to more than two and a half billion dollars.

We've got the two mother ships doing $1.23 billion and $665 million respectively — together almost 10 percent of the home textiles universe — for Kmart and Sears in 2003. Industry estimates for Sears Canada are in the half billion range, while The Great Indoors, Lands' End and Direct Marketing Services each run about $50 million a year in home textiles.

Obviously, the role that home textiles will play as the two companies are merged into one has not been determined —nor will it probably be for quite some time as various governmental agencies play out their roles. After all, you cannot run a full-line retailer on the basis of a home textiles offering — especially when each is struggling to make a mark in its core apparel business.

The major assets that they bring to the merger are money and real estate — and the vision of Edward Lampert. It is clear that he sees the joining of these two troubled companies as something that can make a single positive out of two neutrals or negatives.

Sears has been plagued by a complete turnover of senior management under the aegis of Alan Lacy, its CEO. Kmart has seen comp-sales slide despite an earnings gain.

One of the close-to-home issues for the home business is what will happen to Martha Stewart Everyday, a mainstay at Kmart and growing at Sears Canada. Reportedly, Lampert has been open in conversation about the potential for Martha at Sears as well as in Kmart and Sears Canada. Then there's the issue of the potential migration of the signature and dominant Kenmore appliance brand at Sears.

Stay tuned. It's a real estate, financial and marketing fable that will be fascinating to watch as it unfolds.

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See the May 2017 issue of Home & Textiles Today. In this issue, we discuss our annual Market Basket survey, which finds higher prices and more polyester at leading retailers. See details!