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2004-11-21
Hoffman Estates, IL. Kmart & Sears In Double Suicide Pact

Is the $11 billion merger deal announced this week between Kmart and Sears nothing more than a grizzly double-suicide note to retail America? After all, the last big story we wrote about the red K was when, in January of 2002, the Krash of Kmart left roughly 57,000 of its blue light employees with a pink slip, and more than 800 stores closed. The same with Sears. In January of 201 we wrote that Sears had shut down 89 stores, and sent 2,400 of its workers packing. In July of 2004, Sears came roaring back, purchasing 54 Kmarts and 7 dead Wal-Marts, a $621 million purchase, to launch the new "Sears Grand" movement, a new line of free-standing Sears superstore wannabe Wal-Marts. Sears CEO Alan Lacy said the new Grand idea was designed to "grow the Sears brand off-mall." Under the new merger, workers at both retailers are likely to feel the pain, while the top executives prosper. Both companies say they expect new efficiencies of scale will bring $300 million in annual cost savings -- which usually translates into laid off workers. But don't worry about the boys at the top of the pile. Alan Lacy gets a reported 50% salary hike, raising his pay for $1.5 millon, plus a target bonus of $2.25 million. If things don't go well at the new Sears Holdings company formed by the merger, Lacy will get a severance package of 2 times his salary and bonus. Lacey will be the new vice chairman and CEO of Sears Holdings, while Ed Lampert, the current Chairman of Kmart, will have the title of Chairman of Sears Holdings. Because a suicide pact is a scary proposition, and neither company wanted weak knees to quash the deal, Kmart agreed to pay a $380 million fee if it walked away without pulling the trigger, and Sears likewise agreed to pay $400 million if they walked away. Maybe the biggest winner is Martha Stewart, who has been with Kmart now for 17 years. The expansion of her product line into Sears outlets opens up entire new lines, such as Martha Stewart hacksaws and chisels.

What you can do: Does the consumer really care that these two faltering companies have decided to bleed together? Other than the introduction of refrigerators with blue lights, what does the merger really means to consumers, who have been staying away from Kmart and Sears in droves? Companies like Wal-Mart and Home Depot have been buying up the empty Kmart locations -- now those options will close off for a while. But the stronger retailers are likely to be peeping through the keyhole to see just how fast both these companies continue to bleed. At the very least, Kmart and Sears could have come up with a new name to generate a slight buzz of interest. But they didn't even do that. I was so looking forward to shopping at Seakmart. Better option: stay at home and shop locally. More of your money will stay in your hometown, and out of Mr. Lacy's and Mr. Lampert's pocket.










 
 
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