Sears Close to Selling Iconic Craftsman Brand

After years of continuous declines in sales, Sears is close to selling its iconic Craftsman brand name which may be valued at $2 billion or more. The company made an announcement in May that it plans to consider multiple options for its Craftsman, Kenmore and DieHard brands in addition to the home repair service business known as “Sears Home Services”. While no guarantees regarding acceptance have been made, bids will be taken on the Craftsman brand through the end of October, 2016. Several well known companies have expressed an interest in acquiring the household brand name and bids are expected to approach the $2 billion mark. Although this influx of cash will certainly help the former giant get through the holiday season, experts warn that the company needs significantly greater amounts of capital to stay afloat.

A Brief History of the Sears Company

From its beginning in rural America back in 1886, Sears quickly became a household name and released a 532 page catalog only two years after start up. Catalog sales were impressive yet were surpassed by store sales in 1931 and beyond. National and international growth continued into the 1980’s, a period in which Sears had the largest annual revenue of all retailers in the nation. Wal-Mart displaced their position at the end of the decade and Sears has since experienced a slow and steady decline. Online retailers such as Amazon.com were said to take their toll on the household name, but some state the biggest troubles began when Sears and Kmart merged back in 2005, forming Sears Holdings.

Failed Attempts to Remain Profitable

Despite attempts to market the Craftsman brand outside of Sears and Kmart stores since 2012, Sears continues to suffer quarterly losses and faces potential bankruptcy as debts and negative operating cash flow increase. Sears has already sold off branches of its holdings including the “Sears Hometown and Outlet Stores” business as well as its clothing brand name known as “Lands’ End”. Individual Sears stores have been sold and others have been placed into a real estate investment trust. The decision to sell off the Craftsman brand comes at a time when the company’s pension outlays, interest expenses and capital expenditures total nearly $800 million and the need for holiday working capital exceeding $500 million is anticipated. Considering that the company also has $2.8 billion in loans and high yield bonds requiring payment over the next few years, it is not difficult to see how a $2 billion sale of one of the company’s largest assets will not be enough to bring the organization back into the black.

Numerous Companies Have Expressed an Interest in the Craftsman Brand

Brand experts have acknowledged that few names are as trusted and well known in the home improvement realm as Craftsman and the interest expressed by numerous manufacturers of home related products reflects this fact. Trading of Sears stock jumped 6.4 percent following the company’s announcement to sell the iconic brand. The following national and international organizations are expected to submit a bid before the deadline:

• Stanley Black & Decker Inc., which dates back to 1843 and is based out of Connecticut. The company claims to be the largest tool and storage company in the world and employs over 52,000 people.
• Techtronic Industries, known as TTI and based in Hong Kong. This company manufactures vacuums under the brand names Dirt Devil and Hoover as well as power tools under the Milwaukee brand name. They also own the Stiletto and Homelite brands of hammers and chainsaws, respectively.
• Apex Tool Group, a U.S. based manufacturer of professional grade power and hand tools. The company owns brand names including GearWrench, Cresent, Lufkin and more.
• Husqvarna AB, the Swedish manufacturer of motorized outdoor products including chainsaws, lawn mowers, trimmers and garden tractors.

Too Little Too Late?

The extent of Sears Holdings’ debts and extended periods of negative cash flow suggests that even the sale of one of its best known brands is not enough to keep the company alive through 2017. In 2015, the company reported a $837 million loss in earnings; this year’s losses are expected to approach $1 billion and additional negative cash flow amounting to up to $800 million is anticipated. The sale of its Craftsman brand name seems to offer little more than a band-aid to cover the next few months of operating expenses; hence, the company has also proposed the sale of its Kenmore appliance brand name and the DIeHard line of automotive batteries. The “Sears Home Services” business is also likely to be up for grabs in the near future.

Will Bankruptcy be the End Result for Sears Holdings?

For now, it seems as if Edward Lambert, CEO of Sears Holdings, is doing everything in his power to avoid bankruptcy of the Sears organization. Despite a recent downgrade from SGL-2 to SGL-3 from Moody’s Investors Service which indicates that the company is highly likely to require outside financial assistance to avoid the court system, Sears does still maintain control of a number of highly valuable brand names and businesses. Fitch Ratings seems to agree with Moody’s, stating that Sears poses a “significant default risk” over the next one to two years. A chapter 7 bankruptcy would require the liquidation of Sears’ assets in order to pay off creditors but a chapter 11 filing would allow the company to reorganize and possibly renew their existence, albeit as a much smaller company.

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