Only Edward Lampert Knows

Nov 18, 2004
George Anderson

By George Anderson

Now that the deal many have been waiting for since Edward Lampert took control of Kmart has actually happened, the big question on the minds of most retail industry insiders
and watchers is — what’s next?

The only one who knows the answer to that, as far as Kmart and Sears in concerned, is Mr. Lampert himself.

What ripple effect the deal may have elsewhere in the market remains to be seen. Will the Kmart/Sears merger set off a new round of consolidation? How will the combined company
position itself against competitors, including Wal-Mart, Target, J.C. Penney, Kohl’s and others? What will the deal mean for suppliers to the two retailers? What about the employees
at the companies? How will they be affected?

A report by the Dow Jones Newswire service said other mergers between retailers are likely to follow the Kmart/Sears deal, but none of such magnitude appear in the offing.

George Whalin, founder of Retail Management Consultants, said Mervyn’s is one of the chains most often mentioned to be under new management in the future. Dillard’s and Toys
R Us are also said to be on the block. Toys R Us has publicly announced it is looking at the possibility of a sale to focus on its Babies R Us business. Dillard’s has had no comment
on the rumor.

The combined Kmart/Sears business, once the merger is approved by shareholders of the companies, will create the third largest retailer in the U.S. Only Wal-Mart and Home Depot
currently generating greater annual revenue.

Some believe that, with new and increased purchasing clout, Sears Holdings Corporation, the name of the new company, plans to set its sights on knocking Wal-Mart off its perch
as the number one retailer.

According to a report in the New York Times, Mr. Lampert told a group of investors in New York that the company would have “a very low cost structure to compete effectively.”

Sears Holdings’ other major big box competitor, Target, hasn’t made any public comments on the merger agreement but some believe the new company is more likely to go head-to-head
with it than Wal-Mart.

Scott Weiler, vice president of business at Penn Garritano Direct Response Marketing in Minneapolis, told the St. Paul Pioneer Press the retailer has “a long ways to go
to catch up to Target.’

Stan Pohmer, a Twin Cities retail marketing consultant, agreed with Mr. Weiler. “I don’t think it (the Kmart-Sears merger) will have any impact.’

Moderator’s Comment: What do you think will come out of the Kmart/Sears merger? How will it impact consolidation
in the industry, the competitive playing field, suppliers, consumers, etc.?

Interestingly, in a connection to the Sears/Kmart deal, sources have told RetailWire that Vornado Realty Trust, which recently announced it had purchased
a 4.3 percent share in Sears, is thought to be a front-runner among those strongly interested in buying Toys R Us.

George Anderson – Moderator

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