Boy, the rumor mill is working overtime on Sears Holdings (SHLD) in recent weeks… Let’s look again.
The NY Times is reporting:
“The company’s management (Steve & Barry’s) held discussions over the Fourth of July weekend with Sears Holdings Corporation about a possible bailout or an acquisition of some of its labels, according to people briefed on the talks.
Sears and its Kmart unit, under the ownership of Edward S. Lampert, were said to remain interested in some of the labels, but that company was struggling as well. Steve & Barry’s, which is privately owned, had been one of the fastest-growing retailers in the country, opening hundreds of stores selling clothes under the names of Sarah Jessica Parker, Venus Williams and Stephon Marbury.”
It continued:
“Steve & Barry’s merchandise might actually excite the Kmart customer, but it could be very complicated to do this without paying G.E. a lot of money,” said Howard Davidowitz, the chairman of Davidowitz & Associates, a retail consulting and investment banking firm. He contrasted the situation to the bargain-priced acquisition of the struggling Fortunoff chain by the owner of Lord & Taylor in March. Steve & Barry’s does not own the celebrity brands, but licenses their names, so Ms. Parker and others will retain some control.”
Now, I think it is safe to say we can rule out an acquisition or a cash infusion of the company by Sears. It really just does not seem to jive with what Lampert is doing at Sears.
What I think does make sense and would fit perfectly with Lampert’s current strategy would be either selling the brands in Kmart or an outright acquisition of the rights for some of them. It would be a way to draw shoppers into Kmart without the hassle of establishing a new brand.
Let’s not forget that Steve & Barry’s really kind of got themselves into this mess by operating as though the good times for the economy would never end. As long as it was chugging along, they were fine. But, as soon as it hiccuped, they had no cushion for themselves. The brands are still selling at the stores, it is just that management operated as though landlord concessions would continue infinitely, when they didn’t, ooops..
One also has to consider the online presence Sears has and the additional revenues that can be added through the brand sales there.
Watch the video on the announcement:
So, the brands have tremendous value for a chain looking to lure shoppers. Steve & Barry have to do something and one would think, contrary to what Davidowitz says, GE would be more than willing to make a few concession rather than right off another investment.
Disclosure (“none” means no position):Long SHLD
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