Kmart Corp. and Sears, Roebuck & Co. will merge to form the third-largest U.S. retail chain with $55 billion in annual sales.
The new company will be called Sears Holdings Corp., with 2,350 full-line and off-mall stores, and 1,100 specialty retail stores that will continue to operate under their current names. The new company adopts Sears’ Hoffman Estates, IL headquarters and maintains a presence in Kmart’s hometown of Troy, MI.
Kmart Chairman Edward Lampert becomes chairman of Sears Holdings. Sears’ current Chairman-CEO Alan Lacy and Kmart President-CEO Aylwin Lewis join Lampert in an Office of the Chairman for Sears Holdings. Lacy becomes vice chairman-CEO of Sears Holdings; Lewis becomes president of Sears Holdings and CEO of Sears Retail.
Both chains have been struggling to compete more effectively against No. 1 Wal-Mart Stores and No. 2 Target Stores. The merger builds on improvement plans already underway at Kmart, which emerged from Chapter 11 bankruptcy protection on May 4, 2004, and Sears, which bought 54 Kmart stores earlier this year (June 30 Xtra). (Kmart also sold 24 stores to Home Depot.) The merger will make procurement, marketing, information technology and supply chain management more efficient. The company expects to save $300 million and improve its gross margin by another $200 million.
Both chains will keep their strong private-label brands, including Sears’ Kenmore, Craftsman, DieHard and Land’s End as well as Kmart’s Martha Stewart Everyday, Route 66, Sesame Street and Joe Boxer.
It’s unclear how Sears Holdings will handle marketing, but it seems likely that current plans will continue as stores maintain their current names and positioning. Kmart has been more aggressive in consumer promotions, brokering innovative partnerships with The WB and E! TV for on-air and in-store promos leveraging the networks’ stars for P-O-P and ads in its $30 million back-to-school campaign (Sept. 2 Xtra). Kmart CMO Paul Guyardo called it “our first real statement that Kmart is in the fashion business in a real and important way.”
Sears signed a joint-promotion deal with ABC this fall (Sept. 21 Xtra). The chain also has been developing a sub-brand, Sears Grand, with smaller off-mall stores. Sears had planned to have 70 off-mall stores, including 12 to 14 Sears Grand stores, by the end of 2005 (September PROMO).
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