Kmart and Sears: A Marriage of Convenience
Topic Introduction to Marketing
Key Words Merger, discount retailer
InfoTrac Reference CJ124828901
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News Story 

Kmart and Sears recently announced a merger that will create one of the largest U.S. retailers, producing $55 billion in annual revenue. According to the agreement, Sears Holdings Corp. will operate as the holding company for both the Sears and Kmart businesses, but the 2,350 full-line and off-mall stores and 1,100 specialty retail stores will continue to operate separately under their respective brand names.

While Wal-Mart's $258.68 billion in revenue dwarfs the Kmart deal, investors and company officers seem to think the synergies of the combined entity will bolster its value and enable it to compete. "The merger will enable us to manage the businesses of Sears and Kmart to produce a higher return than either company could achieve on its own," said Kmart Chairman Edward Lampert, who will be the chairman of Sears Holdings.

Both retailers struggled in recent years to attract shoppers amid ever-growing competition from Wal-Mart, Target, Kohl's, J.C. Penney and others. The main benefits, according to executives, will lie in cross-selling signature brands such as Sears' Craftsman tools and Kmart's Martha Stewart homewares. Still, some analysts note that the merger combines two wounded companies that have not fared well in the big-box era.

Questions
1.

What effect do you think the merger between Kmart and Sears could have on discount retailing in general and on the companies' signature brands in particular?

Source Renee Degross, "Sears, Kmart to create nation's No. 3 retailer," The Atlanta Journal-Constitution, Nov 18, 2004.
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