Struggling department store chain Sears Holding agreed to sell its tool brand Craftsman to Stanley Black & Decker in a bid to raise cash and stave off a bankruptcy court protection filing.
Michael de la Merced of the New York Times has the news:
But the response from Stanley Black & Decker’s chief executive, James M. Loree, acknowledged a concern that many on the conference call were likely to have harbored: that Sears could be forced to file for bankruptcy protection someday.
“We expect to get this approved before there is any indication whatsoever that there would be any restructuring of that nature from Sears,” Mr. Loree said, adding that he believed such a move was not imminent.
The sale of Craftsman, valued at more than $775 million, was meant to prevent that day of reckoning by raising much-needed cash for Sears.
For Sears, selling one of its classic brands — one it created nearly a century ago — is the latest move to bolster its balance sheet during a prolonged sales slump.
Edward S. Lampert, the chairman and chief executive of Sears, has struggled for years to find ways to help the company, as much through esoteric financial maneuvers as through operational fixes.
Lauren Zumbach of the Chicago Tribune reports that Stanley will pay Sears a percentage of its new sales of Craftsman products for 15 years:
Separately Thursday, Sears said it’s trying to raise another $1 billion by selling off real estate. On Wednesday, affiliates of the hedge fund managed by Sears’ chairman, CEO and biggest investor, Edward Lampert, lent Sears up to $500 million to fund operations while it negotiates those sales.
Sears announced in May that it was looking for ways to wring more cash from some of its best-known brands — Craftsman, Kenmore and DieHard.
Craftsman still accounted for the largest share of the hand tools and accessories market by dollar share as of September, with about 26.6 percent, and accounts for about 8.3 percent of portable power tool sales, according to Stevenson TraQline, a market research firm. But its share in both categories declined nearly 6 percent over the last four years, shrinking alongside Sears’ sales.
Currently, about 90 percent of Craftsman products are sold through Sears, Kmart and Sears Hometown stores, Stanley President and CEO James Loree said on a conference call Thursday. Much of the 10 percent sold outside Sears-related channels is sold through Ace Hardware stores.
Suzanne Kapner of The Wall Street Journal notes that Craftsman will continue its lifetime warranty:
Jim Loree, chief executive of Stanley Black & Decker Inc., which is buying Craftsman, acknowledged the risks on a conference call, particularly since 90% of Craftsman’s sales come from Sears-related stores. He said the company structured the deal to minimize its risks by assuming no contractual Sears credit risk and no obligation to supply Sears beyond current levels. The retailer bought Craftsman in 1927 for $500.
“Eddie Lampert and his team at Sears Holdings have a compelling vision for the future of Sears, but they also have their share of challenges so there cannot be complete certainty about the future of Sears and what direction it might take,” Mr. Loree said.
Sears will receive $525 million when the deal closes, $250 million after three years, plus annual payments over 15 years.
Sears also said it would continue to shrink by closing 108 Kmart and 42 Sears stores, including the original Kmart location that opened in Garden City, Mich., in 1962. Over the past decade, the company has closed, sold or spun off more than 2,000 stores.
