Photo: Craftsman Club blog
What will the sale of Craftsman mean for Sears and Stanley Black & Decker?
Only about 10 percent of Craftsman products are currently sold outside of stores and websites affiliated with Sears Holdings, but that is about to change now that the cash-strapped parent of Sears and Kmart is selling the tool brand to Stanley Black & Decker.
“This agreement represents a significant opportunity to grow the market by increasing the availability of Craftsman products to consumers in previously underpenetrated channels,” said James Loree, president and CEO of Stanley Black & Decker. “We intend to invest in the brand and rapidly increase sales through these new channels, including retail, industrial, mobile and online.”
When the deal, which was approved by the boards of both companies, closes at some point this year, Stanley Black & Decker will get the rights to develop and manufacture products under the Craftsman name to be sold outside of businesses affiliated with Sears Holdings.
Sears will continue to source Craftsman products through its existing suppliers to sell in its stores as part of a perpetual license with Stanley Black & Decker that will be royalty free for 15 years.
Sears is to be paid $525 million when the deal closes. The retailer will receive another $250 million at the end of the third year and annual percentages of sales after that.
“We are pleased to reach this agreement, after determining that externalizing the Craftsman brand would accomplish our goals of driving value for Sears Holdings and positioning Craftsman for future growth,” said Edward Lampert, chairman and CEO of Sears Holdings, in a statement. “This transaction represents a significant step in our ongoing transformation to a membership focused business model.”
Mr. Lampert, who has recently made the news after his ESL Investments offered a loan of $500 million to Sears Holdings, added, “Looking ahead, we will continue to take actions to adjust our capital structure, meet our financial obligations and manage our business to better position Sears Holdings to create long-term value by focusing on our best members, our best stores and our best categories.”
- Stanley Black & Decker Reaches Agreement To Purchase Craftsman Brand From Sears Holdings – Stanley Black & Decker/Sears Holdings Corporation
- Lampert’s latest bid to prop up Sears: Sell Craftsman – Bloomberg/Crain’s Chicago Business
- Sears CEO lends retailer another $500M amid ongoing losses – New York Post
Discussion Questions
DISCUSSION QUESTIONS: What will sale of Craftsman mean for Sears Holdings? What will it mean for Stanley Black & Decker? Did one company get the better end of the bargain?
Poll
BrainTrust
Bob Phibbs
President/CEO, The Retail Doctor
Kim Garretson
Advisor, MyAlerts
It means Sears is having a Going Out Of Business sale.
When will department stores (like Sears and Macy’s) wake up and recognize that they need to reinvent the entire department store model?
In the meantime shoppers, enjoy the fire sale.
Very smart and low risk approach for Stanley Black & Decker, providing them with a brand with the potential to add some growth for them over the next few years.
The way Stanley Black & Decker structured this deal is very smart. The Craftsman brand is strong but the risk is the close affiliation of sales with the Sears stores and no real market share outside. It is a fair deal for both sides. If Sears holds on to the brand for too much longer and ends up filing for bankruptcy, the Craftsman brand value will be greatly diminished. If Stanley Black & Decker can build the sales outside of Sears, then Sears Holdings will benefit from the percentage payout over time.
At this point I think Sears Holdings has to begin to look at shedding anything of value and getting as much for it as possible. Management has destroyed the retailer to the point of no return. They failed to engage with their core customer base and allowed it to deteriorate over the last 20 years, they failed to invest in technology, failed to embrace e-commerce and failed to take advantage of the strengths they had in durable goods and capitalize on that outside of their own stores.
It is a shame, but one that could have been prevented.
Imagine if Apple sold off the iPhone name — this is pretty close.
When this all started with the forced merger of Kmart and Sears, some pundits said there must be a grand plan of how it pays off. Clearly there is no grand plan. Sad.
The cash raised by the sale is another Band-Aid applied to a gaping wound. Frankly, I don’t understand why Eddie Lampert continues to pour his own money into Sears, but I’m sure there are smarter financial brains out there who can explain it to me.
As to Stanley Black & Decker … big win for them. They now have a portfolio of market-leading brands that will be hard to beat, especially if they do smart product segmentation with an effective retail distribution strategy.
The sale is a way for Eddie Lampert to get a little of the money he has put into the business back. If Stanley Black & Decker can continue the guarantee that came with the line and maintain the integrity of the famous brand, it’s a win for Stanley Black & Decker and for the loyal consumers as well.
Craftsman is gone. Will DieHard soon follow? Lampert has run Sears Holdings into the ground. Will the last person out the door please shut off the lights?
Sears would have been smarter to sell off this fantastic brand years ago; doing it now appears like a fire sale. Stanley Black & Decker is a wise buyer, they will be able to manage the brand in a tiered manner and create retailer interest that can translate to consumer satisfaction. I hope the first thing they do is to solidify the lifetime warranty of the product to ease any and all fears from the very solid user base that the brand has cultivated over many years. That alone preserves the core of the brand promise in consumers’ minds and hearts.
Great move on the part of Stanley Black & Decker and it will be interesting to see how they position the brand and if they keep the lifetime warranty that has kept the Craftsman brand where it remains even with the years of challenges at Sears/Kmart. As for what it means for Sears/Kmart, it’s really just the latest step in a long, slow decline of the retail side and the ongoing investment strategy of Mr. Lampert. Sad to see a brand like Sears and Kmart die a long slow death, but the world changes and Mr. Lampert seems to have a strategy to maximize value.
Craftsman is Sears’ crown jewel brand. Mortgaging its future to cover current hemorrhages is a clear indication that times are desperate for the retailer. Sure they may use the influx of cash to make changes for the better, but once you start chipping away at the bedrock of the company the structure is seriously weakened. This is definitely a milestone we will look back upon regrettably in the (not too distant?) future.
The proud tradition that was Sears, Roebuck & Co. is now officially over. The one compelling reason to go to a Sears store was the Craftsman promise. Mr. Lampert’s mission is now accomplished.
I agree with some of the earlier comments. Why would anyone put more money into Sears? How do they expect to get a return? Oh well, no one ever mistook me for a financial genius. Black & Decker is going to be the big winner here because they get a huge bump gaining the Craftsman brand.
Better to sell it now while it has some value, because the value will decline by the day as Sears continues to decline and gets more desperate to sell off assets.
Sears should try to sell off every asset they have and use their real estate for something more productive, if not liquidation. There is no future for this retailer.
Perhaps they can sell the rest of the chain to Amazon as blimp refill stations. Well-run department stores are struggling to find their place in today’s new retail landscape. Sears has little left to offer.
Being a major tool guy this is great! Craftsman will finally be with a strong player in the tools, security and storage space. Stanley is more of a power shop than Craftsman — they create and sell MAC, Bosch and many of the top brands in Europe. Real tools for real craftsmen.
The Stanley management team is strong and full of creative talent. Craftsman will make a real comeback and not just expand in ways like, gee let’s sell Craftsman tools at ACE stores. Stupid idea, Sears!
Crank it up gang — next Christmas ol’ Tommy is getting some new tools!
What I haven’t read in this news is whether Stanley Black & Decker is already a supplier to the Craftsman brand with its manufacturing capacity. Even if it is not, one major benefit of this deal will be the ability for the buyer to make better use of its global manufacturing ecosystem, and that could mean U.S. jobs and other benefits. I’m wondering when the Kenmore brand will go the same way.
Sadly, this latest removal of a strong Sears asset is analogous to the painful loss of extremities suffered by diabetes patients. The only remaining question is, how much more suffering will the Sears patient be made to endure?
For Stanley Black & Decker this acquisition gives them another quality brand in their portfolio. A win for them and a debilitating loss for Sears.
Am I the only one old enough to remember when A&P sold off the Eight O’Clock Coffee brand? That certainly foretold the last gasp of that chain. Note I said “last gasp,” not the death. That’s because we could see the death coming long before that.
Will this be the same for Sears? Probably.
Having said that, is this a good idea? Again, probably. We actually evaluated the “license or distribute” model for another major tool retailer with a strong brand over a decade ago. The strategic pitfall is the inability to separate the brand from the retail brand identity.
“If it’s Craftsman I must be at Sears.”
Or: “If it’s not at Sears then it can’t really be Craftsman.”
Or: “If Sears made Craftsman tools so great, then Craftsman tools at (Retailer of your choice) can’t be as good.”
So selling the brand is the only real choice.
Somebody just play Taps and let’s get this over with.
Has anyone seen Eddie lately? I’m beginning to think he’s become a new Howard Hughes: some mysterious figure. Only instead of remaining silent, he makes nonsense announcements every once in a while … or someone, or something does (maybe in Sears’ HQ there’s a robot that spews out irrelevant aphorisms with every downturn). Anyway, it means, as one observer put it: “gives them a big infusion of cash, allowing them to circle the drain for a bit longer.” (And we just know that drain isn’t a good ‘ole made-in-the-USA Sears brand one, but rather some chrome plated plastic junk.)
I’m a bit skeptical of how well Stanley can succeed with this. Certainly Craftsman retains tremendous power with consumers. But now Stanley has three powerhouse brands when their existing two had the market pretty well saturated. Within the US, it’s not clear to me that this is a win. This is more complicated since the two big players (Lowe’s and Home Depot) have private label brands (Kobalt & Husky) that are already strong. Doesn’t make much sense for either of them to welcome Craftsman into their stores on a large scale.
That said, it will be interesting to see how it plays out.
Sears will be a loser in this deal and consumers will be the winner. Now consumers will not have to go to a Sears store to buy Craftsman tools. For me there has been a Sears store around for years, yet the chain continues its death march. This sale just gives customers another reason not to shop at Sears.
The Stanley and Craftsman brands represented great quality, so they are unlikely to mess that up. I predict Stanley Black & Decker will do just fine with the Craftsman brand.
Good for Stanley Black & Decker to acquire a well known brand which still has some equity left despite the Sears issues. As long as the quality of the tools is maintained or improved, Craftsman will be a good addition to the portfolio. Definitely have to negotiate carefully to make sure it doesn’t take on the liability part of the operations, though.