SEARS: What Happened?

Sears, Roebuck and Company, once the largest retailer in the U.S. and an iconic American brand, underwent a dramatic and tragic decline over several decades, culminating in bankruptcy and the sale of its key brands. The involvement of Eddie Lampert, a hedge fund manager, played a crucial role in the company’s downfall, and the fate of Sears' key brands like Craftsman, DieHard, and others was directly impacted by his management decisions.?

Sears’ Decline: A Brief History

Sears, founded in 1892 by Richard Warren Sears and Alvah C. Roebuck, was a pioneering force in American retail. It was known for its catalog sales, which brought a wide range of goods to rural America, and later, its department stores, which became a symbol of the American shopping experience. Sears thrived throughout much of the 20th century, especially in the 1950s and 1960s, at its peak employing over 350,000 people and operating more than 3,000 stores.

However, starting in the 1970s, Sears began to lose its competitive edge. The rise of discount retailers like Walmart, the shift to suburban malls, and changes in consumer preferences started to erode its market share. While Sears tried to adapt by diversifying into areas like real estate (with Sears Tower in Chicago) and banking, its core retail operations struggled.?

Eddie Shows Up?

Eddie Lampert is a hedge fund manager and the founder of ESL Investments, a private investment firm. Lampert's involvement with Sears began in the early 2000s, when he made a series of controversial decisions that ultimately led to the company’s decline.?

1. Initial Investment and Takeover (2004–2005): In 2004, Lampert began acquiring Sears stock through his hedge fund, ESL Investments. In 2005, he engineered the merger of Sears with Kmart, a struggling discount chain that he had also invested in. Lampert became the CEO of the combined company, which was renamed Sears Holdings. The idea was to combine the strengths of both retailers and reinvigorate the brands.
2. Focus on Cost-Cutting and Financial Engineering: Under Lampert’s leadership, Sears Holdings focused heavily on cost-cutting, selling off assets, and reducing the company’s debt rather than investing in its stores, products, or customer experience. Lampert, a financier rather than a traditional retail executive, favored financial engineering strategies that included asset sales, real estate deals, and stock buybacks. While this helped improve short-term profitability, it neglected the operational and customer-service challenges that were crucial for long-term survival in retail.
3. Declining Store Conditions: As Lampert reduced investment in the physical stores, they became more outdated and less competitive. The company's iconic "Sears" department stores started to look shabby, and the shopping experience was no longer attractive to consumers. At the same time, competitors like Walmart, Target, and Home Depot were investing in their own stores and improving customer service, which made Sears less relevant.
4. Asset Stripping: One of the most controversial aspects of Lampert's tenure was his decision to sell off Sears' valuable real estate. The company owned a large portfolio of properties, and Lampert sold many of them to real estate investment trusts (REITs) and leased them back. This allowed Sears to raise cash in the short term but deprived the company of long-term assets that could have been used to reinvest in the business.
5. The Slow Collapse: Throughout the 2010s, Sears continued to struggle. Lampert made attempts to revitalize the brand with some success in the short term (like launching the "Sears Hometown Stores" and revamping the Sears website), but these efforts were insufficient. By 2017, Sears was closing hundreds of stores, and by 2018, it filed for Chapter 11 bankruptcy protection.?

The Fate of Key Brands

During this period of decline, Sears' key brands like?Craftsman,?DieHard, Kenmore and others were sold off or licensed in efforts to raise capital, further diminishing Sears’ value as a retailer.

1. Craftsman: Craftsman, the iconic tool brand, was one of the most well-known assets of Sears. In 2017, in a bid to generate cash for Sears' struggling business, Lampert’s company sold the Craftsman brand to Stanley Black & Decker for?$900 million. The deal included an agreement for Stanley Black & Decker to continue producing and selling Craftsman products, but Sears would still be allowed to sell the tools in its stores. While Stanley Black & Decker invested in expanding the Craftsman brand, Sears lost one of its flagship products. Later in this article we will drill down more on the iconic Craftsman brand.
2. DieHard: DieHard, the well-known battery brand, was another key asset. In 2019, after the bankruptcy, Sears sold the rights to the DieHard brand to?Advance Auto Parts?for an undisclosed sum. Advance Auto Parts took over the DieHard battery business, continuing to sell DieHard products in its own stores, while Sears lost another pillar of its automotive and tool business.
3. Kenmore: Another major brand in Sears' portfolio was?Kenmore, which had been synonymous with quality home appliances. In 2017, Lampert negotiated the sale of the Kenmore brand to?Transform Holdco, his own company, which had acquired Sears' remaining assets during its bankruptcy proceedings. While Kenmore was still sold in Sears stores, the brand's long-term prospects remained uncertain as it became just another piece of Lampert’s restructuring efforts.
4. Sears as a "Zombie" Brand: Despite the sale of its key assets, Lampert’s company, Transform Holdco, continued to operate a small number of Sears stores under the Sears name. However, by 2020, Sears had become a shadow of its former self, with only a few dozen locations still in operation, compared to the thousands of stores it once had.?

The Final Outcome: Bankruptcy and Liquidation

In 2018, after failing to find a sustainable way forward, Sears filed for Chapter 11 bankruptcy protection, hoping to reorganize and stay afloat. However, the company faced numerous hurdles, including the decline of its brand, increased competition, and a lack of investment in modernizing its stores and e-commerce platform.

In early 2019, Lampert’s hedge fund, ESL Investments, made a bid to purchase Sears out of bankruptcy for around?$5.2 billion, under the condition that it could acquire the remaining assets and keep the brand alive. However, this offer was ultimately rejected, and Sears was forced to liquidate many of its stores.

Despite efforts to save the company, Sears officially began the process of closing hundreds of stores, leaving a legacy of once-dominant retail brands that had lost their relevance in the rapidly changing retail landscape. By 2020, Sears was reduced to a handful of locations, with the company now essentially serving as a "zombie brand."

Legacy of Eddie Lampert’s Involvement

Eddie Lampert's tenure as the head of Sears Holdings and his role in the company's bankruptcy has been widely criticized. While he succeeded in extracting value from Sears through asset sales and financial maneuvers, he failed to reinvest in the business in ways that could have saved it. His management style, which focused on short-term financial gains and cost-cutting, neglected the fundamental needs of a retail business—modernizing stores, improving customer experience, and embracing the digital shopping era. The fate of Sears and its key brands like Craftsman, DieHard, and Kenmore serves as a cautionary tale about the risks of prioritizing financial engineering over strategic investment and customer-focused innovation in business.

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What Happened with Craftsman

The agreement between?Sears?and?Lowe's?regarding the?Craftsman?brand is a key part of the ongoing evolution of Craftsman after its sale by Sears. Here's an overview of the agreement and its significance:?

Background: Sale of Craftsman to Stanley Black & Decker (2017)?

In?2017,?Stanley Black & Decker?purchased the?Craftsman?brand from?Sears?for?$900 million. This sale included both the rights to the Craftsman name and the tools, but importantly,?Sears?retained the right to sell?Craftsman tools?in its stores for a period of time. While this deal meant that Craftsman would no longer be exclusive to Sears, Stanley Black & Decker committed to significantly growing and expanding the Craftsman brand.?

The Agreement Between Stanley Black & Decker and Lowe's (2018)?

After Stanley Black & Decker acquired Craftsman, they struck a distribution deal with?Lowe’s?in?2018?that allowed Lowe’s to begin selling?Craftsman tools?in its stores. The key points of the agreement were:

1. Exclusive Sales in Lowe’s Stores:As part of the deal,?Lowe’s?was granted the exclusive rights to sell?Craftsman tools?in its stores and through its online platform. This meant that while Sears had sold Craftsman products in the past,?Lowe's became the primary retailer for Craftsman tools?moving forward.
2. Sears Still Retains Craftsman Sales:Despite the deal with Lowe’s,?Sears?still had the right to continue selling Craftsman products in its stores, but this was gradually phased out as Sears’ footprint shrank and as Lowe's increased its Craftsman offerings.
3. Expansion of the Brand:Stanley Black & Decker’s goal with the Craftsman brand was to leverage its broader distribution channels (through Lowe’s) and significantly expand the availability of Craftsman products. This included introducing?new product lines?and?rebranding?Craftsman tools to make them more appealing to a broader customer base.
4. Craftsman’s Growth Under Stanley Black & Decker:Stanley Black & Decker aimed to revitalize Craftsman by enhancing its product offerings. This included bringing Craftsman tools to a wider audience and ensuring that the brand remained a relevant name in the competitive market for power tools and hand tools. Lowe’s was integral to this expansion, as its extensive network of stores and online presence gave Craftsman new opportunities for growth.?

Craftsman and Lowe's

1. Craftsman’s Revitalization: Craftsman had been one of Sears’ most iconic brands for over 90 years, but by the time Stanley Black & Decker took over, the brand had lost some of its shine. However, Stanley Black & Decker, which owns other prominent tool brands like?DeWalt?and?Black+Decker, brought resources and industry expertise to revitalize Craftsman, ensuring it would remain a strong player in the tool market.
2. Lowe’s Benefits: For Lowe’s, the Craftsman brand was a way to differentiate itself from its main competitor,?Home Depot, which already had its own exclusive tool brand,?Husky. By carrying Craftsman, Lowe’s was able to appeal to a broad demographic, from DIYers to professional contractors, and offer a well-known and trusted tool brand at competitive prices.
3. Sears’ Declining Role: Sears, having already lost significant market share and store presence, could no longer serve as the sole retail outlet for Craftsman. This transition effectively marked the?end of Craftsman’s association with Sears, which had been a major part of its identity for decades. Over time, Craftsman became more synonymous with?Lowe’s?and?Stanley Black & Decker?than with its original home at Sears.

?Additional Details

• Craftsman’s Product Lines: Under the new arrangement, Craftsman tools, lawn and garden equipment, and automotive products were available at Lowe’s, with the range expanding over time to include?power tools,?hand tools,?storage solutions, and?outdoor equipment.
• Sales Agreement Terms: As part of the deal, Stanley Black & Decker’s rights to distribute Craftsman through Lowe’s were expected to last for?15 years, meaning Craftsman products would be sold through Lowe’s until at least 2033, unless new agreements were made. This deal also helped Stanley Black & Decker integrate the Craftsman brand into its broader retail network, improving the brand’s accessibility and consumer awareness

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The agreement between?Stanley Black & Decker?and?Lowe's?was a key part of the strategy to breathe new life into the?Craftsman?brand after Sears' decline. Lowe’s became the primary retail partner for Craftsman tools, benefiting from a major brand with significant consumer loyalty. Meanwhile,?Sears?lost its grip on Craftsman, and its role in the brand’s future diminished as?Craftsman’s presence?grew in Lowe’s stores and other retail channels under Stanley Black & Decker’s leadership. This arrangement highlights a significant shift in the retail and brand management landscape, with Sears, once a dominant force, losing control of its most valuable assets, and Lowe's gaining a prominent brand in the tool category that was previously associated with Sears. Althought customers who still have faith in the Craftsman tool line still buy, many of the products bearing the name are no longer made in the United States and in many cases, the Lifetime Warranty that Craftsman customers counted on for more than 90 years, has gone away as well.

Paul Fioravanti, MBA, MPA, CTP, is the CEO & Managing Partner of QORVAL Partners, LLC, a FL-based advisory firm (founded 1996 by Jim Malone, six-time Fortune 100/500 CEO) Qorval is a US-based turnaround, restructuring, business optimization and interim management firm. Fioravanti is a proven turnaround CEO with experience in more than 90 situations in more than 40 industries. He earned his MBA and MPA from the University of Rhode Island and completed advanced post-master’s research in finance and marketing at Bryant University. He is a Certified Turnaround Professional and member of the Turnaround Management Association, the Private Directors Association, Association for Corporate Growth (ACG), Association of Merger & Acquisition Advisors (AM&MA), the American Bankruptcy Institute, and IMCUSA. Copyright 2024, Qorval Partners LLC and/or Paul Fioravanti, MBA, MPA, CTP. All rights reserved. No reproduction or redistribution without permission.

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