Lampert Bets Sears Brands to Win Bigger for His Hedge Fund
So now America has one less reason to go to Sears (SHLD), and maybe one more reason to try to get into Eddie Lampert's ESL Hedge Fund.
Sears has struck an agreement that will make its exclusive Craftsman tool line a little less exclusive. Ace Hardware will beginning selling the Sears popular private label â€" among the foremost store brands in America, up there with Sears' Kenmore brand â€" at about 100 Ace locations beginning in May.
There's a pattern here. Sears has also licensed its DieHard brand and franchised its auto centers. The Craftsman-Ace tie-up, though, is a bigger deal in both the literal and figurative senses.
To kick off the partnership, participating Ace stores, which are privately-owned and operate as a cooperative, will start selling Craftsman hand tools, portable power tools, compressors, wet/dry vacs and tool storage systems.
In June, as the roll-out continues, Ace will promote a range of Craftsman products and open the brand for sale at all 4,500 of its associated stores.
So, in the U.S., Sears will offer one of the brands that does the most to bring shoppers into its stores through a retail network twice as large as the one it controls.
As I've said before, the Sears private labels are among the best assets it has to reinvigorate its retail business--Craftsman, Kenmore and DieHard in particular. When it licensed DieHard, Sears risked diluting the brand, but it was careful not to offer the core product, car batteries, as part of the license, just power accessories. And since franchises can be parceled out on a territorial basis, it could restrict coverage in areas where they might hurt Sears' interests.
With Craftsman, the story is different.
In announcing the Ace deal, Bruce Johnson, interim CEO and president of Sears Holdings, said:
This is an exciting, strategic move that expands access to Craftsman for existing and new customers. Offering an assortment of Craftsman products more broadly through Ace locations will strengthen the Craftsman brand, which already has an incredible reputation for innovation, quality and trust.Yeah, but what about the Sears' brand? If a Craftsman fan can drive a few blocks to an Ace store and feed his tool fix, why should he ever drive to the mall and walk past all those appliances and coats and exercise bikes that Sears wants him to buy, too? Worse, why should his wife, when she's thinking in terms of Father's Day or his birthday or St. Swithin's Day or whenever else a wrench is an appropriate gift, take that tempting trek?
And therein may lie part of the answer, if one keeps in mind that Lampert's hedge fund has to come out ahead for the deal to make sense. But more about that tomorrow.