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Sears Kmart Merger Sears History Kmart History
The new entity: SHC SHC Strategies Retail industry Competition The future of SHC Analysis Review
In the modern world, as globalization keeps expanding and corporations continue to grow nonstop, the terrain in which business is conducted faces new and constant changes each day.
This instability surrounding commerce has in turn created an environment in which if a business does not have enough resources and corporate power, it will fail to compete against other companies.
Thus, it is not a surprise that hundreds of businesses close down each year due to other corporations taking over the market. So what can companies do in these cases? A possible solution is a merger as Sears and Kmart.
A merger is a transaction that results in the transfer of ownership and control of a corporation.
Companies merge for many reasons, whether it be to:
1- Reduce competitions among same businesses. 2- Increase profits, resources.
3- Productivity. 4- Reducing costs for producing such products and services.
5- Cushion the impact of hard times for one company with the others. 6- Gaining entry to a line of business at a lower cost than it would be to start the business fresh. 7- Buying a company undervalued by its stock market price. 8- Taking advantage of loopholes in tax laws. 9- Investing in surplus funds and benefiting from a large company.
A larger, stronger profession
Reduced marketplace confusion.
There are many benefits, including:
Improved services for members.
A strengthened brand and competitive position.
Broader career choices.
Due to: 1- Slow sales and less traffic at both Sears and Kmart. 2- They didn't change while the rest of the industry was changing around them. 3- Sears and Kmart did not differentiate themselves from the competition. The two have decided to merge creating one entity named Sears Holdings Corporation (SHC) in March 24, 2005. Kmart has agreed to buy Sears for $11 billion. This puts Sears Holdings at the third largest retailer - in that time - behind WalMart and Home Depot.
The company operates 3,800 retail locations under the: mastheads of Sears, Sears Grand, Sears Essentials, Sears Hardware, Kmart, Big Kmart, Super Kmart, The Great Indoors, Orchard Supply Hardware, and Lands' End stores.
birthplace of Sears was this railroad station in North Redwood, Minn. A young station agent, Richard W. Sears, launched the business in 1886 and moved it to Chicago in 1887.
Sears had developed the nation¶s first mail order business Company¶s name change to Sears Roebuck Co. and expended offered a variety of merchandise. Sears opted to offer credit service and researched for quality control. First Sears retail store opens in catalog center on Chicago's West Side.
Sears continued its growth in terms of numbers of retail locations in Cuba and Mexico Sears was the number one retailer in the U.S. and one in five consumers shopped at sears regularly. Sears slashed jobs and loss of almost $2.3 billion.
Sears hit $1 Billion again
Opens Great Indoors stores.
Seals ere sl la offs.
ping and staff
In general sears retail b siness had been weak.
The S.S. Kresge Co.'s first store in Detroit opened in 1899. The store contained 2,000 square feet of sales space, employed 18 persons and carried some 1,500 sales items ± none costing more than a dime.
Kresge stores were the second largest five-anddime chain in the U.S. with 85 stores and annual sales of over $10 million.
Similar to Sears, they became in to the Great Depression. Unlike Sears, Kresge stores did not 1929- 1 offer credit to its customers. Created a fast food drive-through called Kmart Chef.
Company opens first Kmart discount department store in a suburb of Detroit. Seventeen other Kmart stores open the same year.
Kmart became the second largest retailer in the U.S. with annual sales of $8.4 billion.
Name changed from S.S. Kresge Co. to Kmart Corp.
Kmart expanded internationally to Australia, Mexico and formed a joint venture with Japan¶s top retailer. The company closed 110 stores, laying off 6,000 staff members and managers and sold off several of its previously acquired business.
Kmart launches Martha Stewart Everyday line of bed and bath fashions, and complementary paint line.
Kmart files for Chapter 11 bankruptcy protection. At the time, the company had 2,114 stores. The bankruptcy led to the closing of about 600 stores and the termination of 57,000 employees.
Kmart announces plans to combine with Sears, Roebuck & Co. in an $11 billion deal. The combined company will be headquartered in the northwestern Chicago suburb of Hoffman Estates, where Sears has its headquarters.
There is overlaps among the products offered by the Sears and Kmart in the home goods with some major differences exist too. This differences in products lines need to be exploited by SHC.
As the new entity ³will feature a powerful home appliance franchise with strong positions in tools, lawn and garden, home electronics and auto repair and maintenance.´
According to SHC Press Release, ³The company expects to achieve annual costs savings of $ 300 million principally through improved merchandising and nonmerchandising purchasing scale as well as improved supply chain, administrative and other operational efficiencies.³ Lampert ±the chairman- believes that: - The anticipated $200 million in additional revenue. - The $300 million in cost savings. - Kmart's $3.8 billion in tax credits. Will shield profits for a number of years, will help SHC's per share price to rise.
new Board of Directors consists of 7 directors from the former Kmart Board and 3 directors from the former Sears Board. The executive team: Edward S. Lambert: Chairman (Kmart). Alan J. Lacy: vice chairman (Sears). Aylwin B. Lewis: President of SHC and CEO of Sears Retail.( Kmart).
Lampert -the chairman- vision for SHC is to build a broader customer base and to increase sales to achieve profits of 10 percent to sales ratio, similar to successful retailers like The Home Depot. This will be accomplished using several strategies.
SHC will expand on SHC will convert Given its huge real the Sears Grand Kmart stores to the estate portfolio, SHC concept (off-mall Sears name in will benefit from the stores which carry markets where flexibility of consumables) to existing Kmart stores switching stores counter the "loss of better fit Sears' between chains and consumers to savvier demographic of selling stores as rivals." Plans are slightly highernecessary. already in place to income shoppers. open 60 Sears Grand stores by 2006.
6 SHC will cross-sell products by having Kmart and Sears carry each other's lines. For example, Kmart will carry Kenmore appliances, Craftsman tools, and Diel-lard batteries, while Sears will carry some of Kmart's brands in the future.
SHC will expand the SHC will be able to emphasize apparel Sears Essentials labels that appeal to a stores by converting multicultural approximately 400 audience. Latinos and existing Kmart African Americans locations. make up a significant share of Sears' shoppers and this group also represents a large share of the shoppers at Kmart's inner-city locations.
Retail industry is the second largest industry in the U.S when ranked by number of establishment s and employees
Expanded at unprecedente d rates from the late 1990s to 2000 Uncertainty following the September 11, 2001 terrorist attacks and global unrest.
The rise of Wal-Mart and other big box discount retailers and the economic recovery in the mid 2000s changed the retail landscape.
Catalogs and e-commerce have globalized the retail market.
More mega mergers will result in the closing of more stores, which in turn will propel even more mergers and acquisitions in retail and closely related industry.
In the current retail economy, consumer rends lean toward value and frugality, leading to a movement away from department stores and to the rise of discount retailers.
The long-term forecast for department stores in U.S suggests a continued slow growth rate in to the next century as the industry continues to battle online retailing direct marketing and home shopping networks.
Value Retailer: Mass Merchandiser Discount Store Value Store
Merchandise Offers variety of merchandise Limited Service Low Prices Offer private labels and national brands Top chains Wal-Mart Target
First Store Opened November 1962 Founded by Sam Walton(1918-1992)
Largest Retailer in the world 1991 Always Low Prices««Always RollBack Prices
942 isc t t res 238
15 8 isc t t res 1258
Over 1,500,000 Empl yees
Prices People who live paycheck to paycheck McDonald¶s, Pharmacy, Photo Center, US Cellular. Friendly Atmosphere/ Greeter. Customer Service.
Brief History 1910 Dayton Company
Enters discount 1962 merchandising 1982 1998 Revenues $5 Billion Revenues $ Billion
1313 Stores in 47 States 136 Super Targets in 20 States 22 Distribution Centers 3 Import Warehouses
Trendy, high quality merchandise at reasonable prices Exclusive brands like Mossimo, Liz Lange, Isaac Mizrahi Target to a T Image of customization
Wal-Mart is the undisputed leader.
Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. he company has a core competence involving its use of information technology to support its international logistics system. For e ample, it can see how individual products are performing country-wide, store-by-store at a glance. I also supports Wal-Mart's efficient procurement. A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.
SHC`s business strategy must specifically address the issues of competition, culture and synergy in a very focused way. (combine brand, product lines, operations and systems) Both organizations come from distinct, historic and proud pasts, it would be a challenge to combine these disparate entities to form one unique culture.
It is important to make efforts to retain employees from both companies.
To be successful on the competition, key goals will be to create a culture of success among the disparate organizations of Sears and Kmart to generate customer loyalty, and position SHC based on its identity in the general merchandise market.
Provide a compelling power brand statement
Bringing the benefit of big box retailing combined with power brands to inner city, lower income, ethnic shoppers.
22 Nov. 2004
It¶s going to be more profitable, more stable with a better strategy
Kmart brings stronger soft home goods to the merger(Mart ha Stewart)
22 Nov. 2004
24 Mar. 2005
29 Nov. 2004
2 threats for merger: 1- Debt will be more expensive 2- power and growth of web shopping are weak areas for both firms.
³We do not believe that adding Sears appliances to Kmart or Joe Boxer apparel to Sears will turn either company around´ Georg S., G, S. analyst
Most analysts are skeptical the combination of 2 struggling retail brands that will continue to operate separately will thrive in a sector dominated by Wal-Mart 30 Mar. 2004
You have 2 retailer who are doing badly right now
18 Nov. 2004
22 Nov. 2004
10 Feb. 2005