Does Food Have a Place in Kmart-Sears?

Discussion
Dec 01, 2004
George Anderson

By George Anderson


An editorial written by Supermarket News’ David Merrefield asks what role food will play as Kmart and Sears merge their businesses.


Mr. Merrefield correctly points out that Kmart has gone down the food road before and failed taking its wholesaler, Fleming Foods, with it.


He also acknowledges that many within industry circles sees the merger of the two chains as more of a real estate play than an attempt to create a powerful retailing entity.


“Certainly, that’s a strong component, since both companies have ample holdings to swap or spin off,” he writes. “It’s just as likely, though, that Lampert [Edward Lampert, chairman of the combined companies] views Kmart-Sears as an operating business, not as a pure real-estate play. He has said as much, and such is more than possible. After all, moribund store locations are flooding the market, diminishing their value.”


Instead, Mr. Merrefield suggests, Edward Lampert may choose to give grocery retailing another shot, albeit more limited than in the past, to build on existing strengths of the two chains. “He may calculate that the combination of Kmart and Sears will prove useful in competing with Wal-Mart. Both Sears and Kmart have attractive store brands that, used together, could power broad-line retailing.”


Mr. Merrefield does hedge his bet on Kmart-Sears’ plans for food and he thinks the retailer(s) may be following a similar line of thinking. “The complexity of combining the hard-line retailing assets of Kmart and Sears, along with the paucity of the controlling investor’s food experience, suggest that neither store will depend much on full-line supermarket retailing.”


Moderator’s Comment: What role do you think food retailing will play in the future of Kmart-Sears?
George Anderson – Moderator

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