Sears sells Craftsman brand for $900M
Stanley Black & Decker deal reduces reasons for shopping at retailer.
Sears Holdings will sell its Craftsman tool brand to Stanley Black & Decker for about $900 million, the companies announced Thursday.
The deal will provide another cash infusion for Sears, but it comes at a cost — broadening distribution of the well-known brand gives consumers one less reason to choose to shop at the struggling retailer.
Stanley will pay $525 million when the deal closes — expected this year — and another $250 million after three years, the companies said. Stanley will pay Sears a percentage of its new sales of Craftsman products for 15 years, and during that time, Sears will be able to continue selling Craftsman products royalty-free.
“This agreement represents a significant opportunity to grow the market by increasing the availability of Craftsman products to consumers in previously underpenetrated channels,” Stanley President and CEO James Loree said in a news release.
Sears, headquartered in suburban Chicago, announced in May that it was looking for ways to wring more cash from some of its best-known brands — Craftsman, Kenmore and DieHard.
“We are pleased to announce our agreement to restructure the ownership of our Craftsman brand, which will allow us to both realize value and participate in the expansion of its distribution and service offerings,” Sears CEO Edward Lampert said in a news release.
Currently, about 90 percent of Craftsman products are sold through Sears, Kmart and Sears Hometown stores, Loree said. Much of the 10 percent sold outside Sears-related channels is sold through Ace Hardware stores. Loree said he thinks Stanley can increase sales by making Craftsman available outside Sears stores and estimated the brand could add about $100 million of revenue growth per year for the next 10 years.
The sale is Sears’ latest move to come up with more cash to fund its operations while it tries to halt sliding sales. During the first two months of the fourth quarter of 2016 — part of the all-important holiday sales season — sales declined about 12 to 13 percent at stores open at least a year, Sears said in a news release.
Affiliates of Lampert’s hedge fund, ESL Investments, agreed to lend the company up to $500 million, backed by mortgages on Sears’ properties, earlier this week while Sears works to sell real estate to pay back debts. Their loans to the retailer add up to more than $1 billion since September 2014.
Sears has created a committee to market certain real estate properties and aims to raise more than $1 billion, the company also said Thursday.
It’s also announced 109 Kmart and 41 Sears store closings over the last two weeks. Those 150 stores generated about $1.2 billion in sales in the last year but lost about $60 million, Sears said.
“Many of these stores have struggled with their financial performance for years and we have kept them open to maintain local jobs and in the hopes that they would turn around. But in order to meet our objective of returning to profitability, we have to make tough decisions and will continue to do so, which will give our better performing stores a chance at success,” Lampert said.
Stanley isn’t taking on any contractual credit risk from Sears and isn’t obligated to become a bigger supplier.
“We think the risks are manageable and contained, and the opportunity is immense,” Loree said Thursday.
Loree likened Sears’ catalog, 40 or 50 years ago, to the role e-commerce plays today. “The world has changed, but Craftsman is still an incredibly strong brand,” he said.