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Mixing famous lines could weaken brands
Will Martha Stewart be wearing a Lands' End cardigan in the Kmart stores of the future?
Not likely, say several retail observers.
Of all the exclusive Sears, Roebuck and Co. brands that could end up in Kmart stores after the retailers merge, the preppy clothing line is least likely to fly with the discount chain's budget-conscious shoppers.
Even worse, several respected Sears brands -- including Craftsman -- could lose their luster if they're moved into a retailer whose sales have crumbled worse than Sears', they caution.
Sears bought Lands' End in 2002 because it wanted a marquee clothing brand for its 870 mall stores. In August 2003, Sears completed the Lands' End rollout.
But a year later, widespread customer acceptance of Lands' End at Sears has been so elusive that the retailer has reduced the brand's inventory in some markets.
And the chances that Kmart's customers would embrace the brand are not great, the analysts say.
"It's a lot easier to see Kmart's Martha Stewart brand in Sears than it is to see Lands' End in Kmart," said Marshal Cohen, chief industry analyst for market-research firm NPD Group. "Lands' End will be the last Sears brand to transition over to Kmart--if it's going to be shared at all."
Indeed, there is speculation that the new leadership at Sears--known for trying to maximize assets--could decide that Lands' End and its catalog business might be a better fit with another merchant.
In recent months, some investment-banking firms have been estimating how much various Sears' businesses are worth.
"Sears needs to figure out its brand portfolio," said Timothy Calkins, associate professor of marketing for Northwestern University. "One way they could raise some cash is by potentially selling that brand to another outfit."
One analyst pessimistic about the merger doesn't think that Lands' End is the odd brand out--not yet anyway.
"I've heard speculation about that, but I'm not sure what they'd gain from that at this point," said Fitch Ratings analyst Philip Zahn, who on Wednesday said he's considering downgrading Sears' senior unsecured debt to junk status. "But anything is possible. They're into doing big transactions now."
Sears spokesman Chris Brathwaite said it is too early to say what the mix of products--including top brands like Kenmore appliances, Craftsman tools and DieHard batteries--would be at the new company's stores.
But analysts pointed out that the cachet of some Sears brands could diminish if they're carried in Kmart.
"Lands' End, Craftsman--those brands have tremendous brand heritage, and it might not make sense to risk their brand equity" by adding them to all Kmart stores, said Lois Huff, analyst for Retail Forward. "Sears has the stronger brand equity as a company, the stronger brand assortment."
One idea: Develop a line of clothes or tools for Kmart and incorporate the phrasing "By Lands' End" or "By Craftsman," reserving the higher-end products for Sears' stores, Huff said.