11/19/2004

Kmart and Sears!?

Who would have guessed that K-Mart and Sears would have merged to create a new company! Sears Holding Corp. is the fresh title. “The new company is expected to have $55 billion in annual revenues and 3,500 outlets. It will be the third largest retailer in the U.S., after Wal-Mart Stores Inc. and Home Depot Inc.”

I am shocked by this merger! I really do wish the best for K-Mart and Sears, but it really doesn’t make too much sense. Both companies have been struggling to keep up as of late, and both companies have different images!

Sears has a great reputation for the quality of their tools and other home appliances. I’m wondering how that will match up with the saying “K-Mart Fall Apart!” Is Martha Stewart still going to be around and involved with Sears Holding Corp.? I really hope that they have some excellent ideas for success, because I think this will be a huge challenge.

4 comments:

Kova said...

I am shocked and confused by this merger as well. We've all heard the saying "two wrongs don't make a right", and I think that same concept applies here. Two struggling companies don't create a good company.
I makes me wonder just which consumers this company is going to try to target. There doesn't seem to be a market for them at all!
Maybe I am just prejudiced though. I think K-Mart's time as a company has passed. They should just cut their losses and get out now.

Jake said...

These two companies are too far behind competition to try to gain market share. It will be extremely dificult for them to compete with market powers such as Walmart and Target. Maybe their strategy is knowing that they will not be able to compete with Walmart or Target, but be able to attract those that prefer not to shop at the other two by positioning themselves in areas where it would be more convenient for the consumer and that way they might be able to turn a reasonable profit. Good Luck!

pramahaphil said...

Sears and K-Mart can be a positive merger. Sears and K-Mart both have some of the most profitable private label brands in the country. By merging they are able to sell those private label goods in more locations. This merger will be profitable as long as they over come both companies "stuck in the middle" competitive strategies.

Dr. Tufte said...

This merger doesn't make much sense to me either.

I know what was in it for Sears - money. K-Mart had to pay a premium to get Sears' shareholders to agree to this, and it makes sense to sell out for more money.

But what is K-Mart getting? They're getting some decent brand names, and locations that are predominantly in malls. Is that an improvement for a company that has some decent brand names (well, one at least) and a bunch of locations near malls? I don't think so.

The evidence on mergers and acquisitions is that they usually don't turn out to be good deals for the acquiring firm. This doesn't seem any different to me.