Did you know Sears is considering selling some of it’s best known brands – Craftsman® , DieHard®, Kenmore® and Lands’ End® – through retailers beyond it’s nearly 3,800 US and Canadian stores?
Imagine walking into a Lowe’s or Home Depot and seeing Craftsman outdoor power equipment in the OPE section. Or going into your local Goodyear Tire store or even a Wal-Mart to buy a DieHard battery. Or visiting your local Best Buy store and buying a Kenmore refrigerator.
Here’s what Sears Chairman Eddie Lampert recently had to say about this new strategy.
“One of our most important resources is the great brands we own, in particular DieHard, Craftsman, Kenmore, and Lands’ End,” said Sears Chairman Edward S. Lampert in a letter to shareholders. “All four of these brands have significant equity with customers and provide tremendous opportunity for value creation.”
The move to sell Sears brands through other retailers “is an opportunity for us to rethink our brand distribution strategy to create value,” said Lampert.
Lampert went on to explain that DieHard “leads in customer recognition among car battery brands by a wide margin, but it lags dramatically in market share . . . due to fewer points of distribution.”
DieHard batteries are only sold today in Sears automotive departments, while competing batteries are sold at thousands of locations nationwide, many of which are more conveniently located for customers. Some analysts see this as an admission that Sears’ primary distribution channel, its stores, are hopelessly broken.
In 2007, Sears deployed $4.3 billion in capital: $3.5 billion went to share repurchases and debt reduction, while only $580 million was reinvested in the business.
On the other hand, Wal-Mart invested $14.9 billion into its stores and business in 2007.
Successful retailers start with a winning store operating model as the core to build from, and then follow with brand and channel extension.
This is not the Sears strategy and it shows. In 2007, Sears had dreadful sales performance and a 41% drop in earnings.
Sears does have lots of staying power and cash, however, so it will be interesting to follow how successful their brand extension strategy will be. And which retailers will end up selling one or more of these four strong Sears’ consumer brands.
I wanted to share a few of Warren Buffett’s comments from his annual Chairman’s Letter to the Shareholders of Berkshire Hathaway, Inc., found in the Berkshire Hathaway 2007 Annual Report. His annual letter is always enlightening and great fun to read.
In mentioning the current problems affecting financial institutions, Mr. Buffet quoted John Stumpf, CEO of Wells Fargo, as aptly dissecting the recent behavior of many financial lenders: “It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine.”
In further comments about the current financial situation, Mr. Buffett said: “You may recall a 2003 Silicon Valley bumper sticker that implored ‘Please, God, Just One More Bubble.’ Unfortunately, this wish was promptly granted as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. You can only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.”
On acquisitions, Mr. Buffett said “To date, Dexter (a shoe company) is the worst deal that I’ve ever made. But I’ll make more mistakes in the future – you can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions: ‘I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.’”
Leading into a section on his insurance companies, Mr. Buffett wrote about “the best anecdote I’ve heard during the current presidential campaign. Mitt Romney asked his wife Anne, ‘When we were young, did you ever in your wildest dreams think I might be president?’ To which she replied, ‘Honey, you weren’t in my wildest dreams.’” So there…
I highly recommend, as I did last year, that you read all of Mr. Buffett’s Letter to the Shareholders of Berkshire Hathaway in the 2007 Annual Report. You can read it here: www.berkshirehathaway.com/letters/2007ltr.pdf
Imagine walking into a Lowe’s or Home Depot and seeing Craftsman outdoor power equipment in the OPE section. Or going into your local Goodyear Tire store or even a Wal-Mart to buy a DieHard battery. Or visiting your local Best Buy store and buying a Kenmore refrigerator.
Here’s what Sears Chairman Eddie Lampert recently had to say about this new strategy.
“One of our most important resources is the great brands we own, in particular DieHard, Craftsman, Kenmore, and Lands’ End,” said Sears Chairman Edward S. Lampert in a letter to shareholders. “All four of these brands have significant equity with customers and provide tremendous opportunity for value creation.”
The move to sell Sears brands through other retailers “is an opportunity for us to rethink our brand distribution strategy to create value,” said Lampert.
Lampert went on to explain that DieHard “leads in customer recognition among car battery brands by a wide margin, but it lags dramatically in market share . . . due to fewer points of distribution.”
DieHard batteries are only sold today in Sears automotive departments, while competing batteries are sold at thousands of locations nationwide, many of which are more conveniently located for customers. Some analysts see this as an admission that Sears’ primary distribution channel, its stores, are hopelessly broken.
In 2007, Sears deployed $4.3 billion in capital: $3.5 billion went to share repurchases and debt reduction, while only $580 million was reinvested in the business.
On the other hand, Wal-Mart invested $14.9 billion into its stores and business in 2007.
Successful retailers start with a winning store operating model as the core to build from, and then follow with brand and channel extension.
This is not the Sears strategy and it shows. In 2007, Sears had dreadful sales performance and a 41% drop in earnings.
Sears does have lots of staying power and cash, however, so it will be interesting to follow how successful their brand extension strategy will be. And which retailers will end up selling one or more of these four strong Sears’ consumer brands.
I wanted to share a few of Warren Buffett’s comments from his annual Chairman’s Letter to the Shareholders of Berkshire Hathaway, Inc., found in the Berkshire Hathaway 2007 Annual Report. His annual letter is always enlightening and great fun to read.
In mentioning the current problems affecting financial institutions, Mr. Buffet quoted John Stumpf, CEO of Wells Fargo, as aptly dissecting the recent behavior of many financial lenders: “It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine.”
In further comments about the current financial situation, Mr. Buffett said: “You may recall a 2003 Silicon Valley bumper sticker that implored ‘Please, God, Just One More Bubble.’ Unfortunately, this wish was promptly granted as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. You can only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.”
On acquisitions, Mr. Buffett said “To date, Dexter (a shoe company) is the worst deal that I’ve ever made. But I’ll make more mistakes in the future – you can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions: ‘I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.’”
Leading into a section on his insurance companies, Mr. Buffett wrote about “the best anecdote I’ve heard during the current presidential campaign. Mitt Romney asked his wife Anne, ‘When we were young, did you ever in your wildest dreams think I might be president?’ To which she replied, ‘Honey, you weren’t in my wildest dreams.’” So there…
I highly recommend, as I did last year, that you read all of Mr. Buffett’s Letter to the Shareholders of Berkshire Hathaway in the 2007 Annual Report. You can read it here: www.berkshirehathaway.com/letters/2007ltr.pdf
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