Kenmore Deal a Short Term Solution for Sears… Simply Delaying the Inevitable

Sears is one of the most iconic retailers in U.S. history. The company started the mail order catalog in 1888, and grew its brand of department stores from there as it became one of the driving forces behind malls. But lately, times have been tough for Sears. The once proud retail giant has shuttered Sears and KMart stores left and right as it tries to avoid bankruptcy. Now the company is doing something it’s never done before, turning to online distribution to turn things around. But is it too little too late?

Can the Deal Sears Struck with Amazon Right the Ship?

While Sears has been struggling to adapt to modern day retail trends, the company has been bailed out on several occasions by cash injections from CEO Eddie Lampert, who has given personal loans as well as investments from a hedge fund he manages. However, a cash injection isn’t enough if nothing is changing. So Sears is working to change. The next step? Selling its proprietary Kenmore brand through Amazon.

While the deal makes a ton of sense for Amazon, it’s a desperation play by Sears. Amazon gets to offer a leading brand on a pretty exclusive basis. Other than Sears itself, consumers won’t have any other options to purchase a Kenmore appliance. As the world’s leading online retailer, getting a leading brand no one else has just adds fuel to the fire. Smart play by Amazon. But for Sears?

Sears might see a small bump in sales from this deal, but the truth is, those sales won’t be enough to offset the trend of declining sales Sears has been experiencing for years now. Unless Sears has a bigger picture plan for expanding distribution of its products and brands, this changes nothing for the struggling retailer. That’s best case scenario. Worst case scenario? People who were willing to go to Sears specifically for its Kenmore brands now have one less reason to visit the store, or even the online store.

Clearly Sears is struggling. But they do have some valuable name brands. The best of those was Black & Decker, which sold this year for $900 million, down from the original $2.2 billion that was being considered. With Kenmore being another leading brand name, why isn’t Sears trying to sell the Kenmore brand? Most likely, no one wants it. Which is just another in a growing list of bad signs for Sears.

Watch this video from iBankCoin.com about the Amazon Sears Agreement to sell appliances online:

Ignore the hype around the deal. Expect shares of Sears Holding Corp. (SHLD) to continue DOWN.

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