Lampert Looking to Buy Another Retailer

Discussion
Nov 10, 2006

By George Anderson


Okay, Sears Holdings is cash rich and Edward Lampert, the company’s chairman, is looking for something to buy.


Until now, rumors have had it that Mr. Lampert was looking at BJ’s Wholesale, Gap Inc., Home Depot, Anheuser-Busch Cos., Manny Moe & Jack, and RadioShack as potential acquisitions.


Now, speculation on the investment web site Briefing.com has raised the possibility that perhaps Sears Holdings might decide to go after Safeway.


Howard Davidowitz, chairman of Davidowitz & Associates, told the Chicago Sun-Times that Mr. Lampert might need an acquisition to satisfy the demands of investors in
his hedge fund.


On the Safeway speculation, Mr. Davidowitz believes Sears could benefit from Safeway’s food distribution system to supply its Sears Grand and other stores.


Sears Holdings has extended its offer to purchase the remaining 46 percent of shares it does not currently hold of Sears Canada. The Canadian business has called a special shareholders
meeting on November 14 to consider the offer.


Discussion Question: What are your thoughts on a possible deal by Sears Holdings to acquire another retail chain, specifically Safeway or another large
grocer?

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21 Comments on "Lampert Looking to Buy Another Retailer"


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Mark Lilien
Guest
15 years 6 months ago

Edward Lampert can make money buying almost any retailer, as long as the price paid is a bargain. To list an acquisition candidate’s name without a price tag is an incomplete answer. Would you buy a new BMW for $5,000? Would you buy a new BMW for $150,000? Great fortunes can be made when assets are bought for bargain prices. A year ago, Safeway was $23. Now it’s $31. At $31, it might not be a screaming bargain. If Sears and Kmart really wanted better in-store supermarkets fast, they could lease out the space to experienced operators without having to buy anyone. Or they could hire any number of industry veterans with demonstrated track records to create their own great organization.

Ryan Mathews
Guest
15 years 6 months ago

How can you argue with success? Oh, sorry. I can see it now — Craftsman socket sets in the produce department and Lands’ End Mock Turtle soup. Sometimes you get large because you are growing and sometimes you get large because your capacity to consume exceeds your ability to reason or because you’re not self aware or taking care of yourself and you are developing a huge tumor. I think Sears Holding should get Sears Holding running smoothly for a minute before they look for new industries to conquer.

Dan Nelson
Guest
Dan Nelson
15 years 6 months ago

“Shopping” and “buying” are 2 very different things, and while Sears is in a position to make a significant acquisition, they should think long and hard about the challenges each opportunity presents. Safeway is doing well and moving in the right direction, but on a completely different platform than Sears/ Kmart.

I would think, for a number of reasons, Home Depot or another possibility mentioned offers many more connective points for integration and business synergies than Safeway could provide.

Ben Ball
Guest
15 years 6 months ago

Ummmm….at least they’d have one that seems to be headed in the right direction?

Seriously, not a lot of dry goods retailers have made a successful transition to food distribution. Wal-Mart and Target being notable successes, but Kmart followed the familiar path. The success of this venture would depend largely on Sears Holding’s willingness to allow Safeway continued autonomous operation — not something they have demonstrated to date. Safeway is a good buy for someone, but maybe not Sears.

Dr. Stephen Needel
Guest
15 years 6 months ago

I would think the profit margins from a “standard” grocery business would be too small for a company like Sears.

Craig Sundstrom
Guest
15 years 6 months ago

No…please, God, no.

Bob Bridwell
Guest
Bob Bridwell
15 years 6 months ago

This makes no sense to me. Sears seems to know the hard lines and has a good brand franchise there. They know next to nothing about food. Kmart has some depth in soft lines, but their food expertise is zero or less. Safeway is a now a “happening” company.

Except for being the retail category, I see no other favorable connections or outcomes between these combinations.

Here’s an idea…buy a major stake in Target to “hedge” your Kmart holdings. I bet they could sell a lot more Craftsmen tools than Kmart can, does or will do.

Richard Layman
Guest
15 years 6 months ago

Re the comment about Penn Traffic and Winn-Dixie….

Tops and U.S. Foodservice are available and wouldn’t make sense either. If they really want core competence in food distribution, do a joint venture with Supervalu.

MARK DECKARD
Guest
MARK DECKARD
15 years 6 months ago

So, does this mean “Super-K” becomes “Safe-K” and current Safeway stores will have Martha Stewart and Craftsman?

It might play….

James Tenser
Guest
15 years 6 months ago
A Sears-Kmart/Safeway deal somehow doesn’t pass the “smell test” for me. (How’s that for scientific reasoning?) Safeway has been on a roll lately as a consumer-centric retailer, while the S-Mart hybrid is looking relatively lackluster. I don’t see how Safeway’s grocery knowhow would translate beneficially to the Sears stores, and I certainly don’t think Sears has much to bring to the Safeway operation beyond financial depth. A Safeway/Kmart Hypermarket concept might fly (SafeMart?)- but Safeway could probably do as well on its own. All in all, I think Sears/Kmart should stick to its knitting and invest in being a better solution provider for consumers. All that capital can be put to good use, if smart merchants and marketers are given authority to invest it. If I were Safeway CEO Steve Burd, I’d steer the company away from Ed Lampert’s empire-building. If Safeway is looking for a merger opportunity that leads to hypermarkets, it might consider approaching BJs or even Meijer. Otherwise, it should stick to pursuing and refining its consumer-centric strategy, which is potentially a… Read more »
John Rand
Guest
John Rand
15 years 6 months ago

Can you imagine the employee fallout? Safeway has finally put together a reasonably effective team and is learning how to merchandise and market in a better way – and Sears/Kmart suddenly comes in looking for “synergies”?

I would guess that Lampert still hasn’t learned that retailing expertise isn’t bolted onto the store or sitting in a file drawer – it’s in the people, and I can’t imagine how many talented people would be gone within days or weeks of this ever happening.

For consistency, he ought to buy Penn Traffic and Winn-Dixie.

Michael Tesler
Guest
Michael Tesler
15 years 6 months ago

Sears would be better off holding on to that cash. They should be learning the business they are in and making it work. They definitely should not be getting into a business they do not know, that is possibly even more difficult than the one they have not yet come close to understanding and mastering.

Kai Clarke
Guest
15 years 6 months ago

I disagree with many of my fellow BrainTrust panelists. I think that this would be a great match. It would complement the strengths of Sears Holdings while diversifying their reach. Safeway is a strong player in the grocery industry, but this expansion would enable Kmart to better manage their superstore’s food needs, while allowing Safeway to position itself as a Hypermarket with full hard goods access through Sears Holdings. Also, the real estate locations appear to be complementary since the base stores of Sears and Kmart generally don’t conflict with the store locations for Safeway. What is not to like about merging the strengths of these retailers and creating better focused stores with a greater reach?

Pete Hisey
Guest
Pete Hisey
15 years 6 months ago

I like the idea of Sears buying Safeway, as long as they keep their mitts off what Safeway is doing and instead learn from them. There are synergies there, and the possibility of a new level of supercenter, along with prime real estate and the opportunity to reinvent Kmart to serve the urban market with a truly innovative product mix.

Whether that would work in the real world is quite another question, though.

Camille P. Schuster, Ph.D.
Guest
15 years 6 months ago

Hasn’t Sears had difficulty identifying its position and niche in the consumers’ mind? Is that well established now or are consumers still trying to figure out what is available at Kmart and what is available at Sears or why those Sears products are at Kmart? And now they want to add a grocery store? Tell me again, what is your core business? The track record of companies expanding far beyond their core business is not good. History will repeat itself if no one pays attention.

George Andrews
Guest
George Andrews
15 years 6 months ago

I imagine it won’t be good for Safeway or Sears. There is no consistent track record of turning a business around yet by Sears or Kmart or Sears Holdings. If Sears would leave Safeway alone as Ben said and perhaps leverage a better distribution system, maybe it would help, but not likely.

Remember when Sears and Montgomery Ward had 2 brothers battling to turn their respective companies around? MW disappeared and Sears remained lackluster. Sears bought the Lands’ End brand and maybe the softer side of Sears would turn around? Lands’ End departments in the few Sears stores I have been in recently were anemic. (The catalogue is still strong). I walk through Sears and Kmart today and find both retailers far behind in merchandising and customer count to Target, J.C. Penny and Wal-Mart. The real frustration is that Sears does have some strong hardline departments. Let’s improve Sears and Kmart first?

David Livingston
Guest
15 years 6 months ago

As far as benefiting from buying Safeway to assist in the food distribution to Sears Grand makes little to no senses. That’s because Sears Grand stores do little to no business now and have a very limited food presence.

This is good news for the competitors of any business purchased by the hedge fund. It could be a win-win all around, except perhaps for the employees of the company that gets purchased. Personally I would love to see Safeway get acquired.

I can understand the need to make new acquisitions. The more companies that are acquired, the more the Sears/Kmart blunder is dwarfed.

William Passodelis
Guest
15 years 6 months ago

Sears should FOCUS ON SEARS –Sears still has some great brands and potential. Kmart, as far as I am concerned, is a total disaster and I feel badly about that — grocery operation is very difficult and low margin. Kroger has great difficulty keeping up with Wal-Mart, who now OWNS grocery because of volume and size, but Kroger IS a GREAT grocer! Sears would find a difficult and distracting business if they acquired Safeway — they WOULD need to LEAVE Safeway autonomous — however, that doesn’t necessarily mean they would have beneficial or additive results. They need to keep their cash and CONCENTRATE on optimizing, improving and making progress with the Sears brand and then perhaps try to modify Kmart to improve that establishment — Fix your own problems before you take on someone else’s.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 6 months ago

Has this Chairman and CMO taken care of his current retail operations? Consumers, and my friends, haven’t seen anything but pricing discounts and the same old, outdated stores.

Can you see the ‘turn-around’ and repositioning promise that he made to the financial industry?

Cash flow must be good. And, one of his current and ‘fixed’ operations must be ready to sell, as he contemplates another acquisition. Almost like the days of Beatrice Corporation’s strategic direction and acquisition craze.

The chairman may need a strategic and marketing chief officer!

Justin Time
Guest
15 years 6 months ago

Eddie would be wise to first fix Sears Grand. After doing that, perhaps a Lowe’s, or Home Depot acquisition would be a better fit.

After all, Sears in its day, with its Sears Town, invented the do-it-yourself segment as well as evolving one-stop shopping.

That would be the better avenue to pursue.

Also they could buy another big box retailer like Best Buy or even Kohl’s and expand them, using the Sears mall anchors, as new locations. This also would make sense.

Art Sebastian
Guest
Art Sebastian
15 years 6 months ago
There are two ways to look at this in my opinion:1. Sears Holdings should not acquire another business and focus on determining their own identity and core consumer they are targeting.2. Sears Holdings should acquire a successful retailer like Safeway or Home Depot and leverage their strategy, talent pool and brand. In terms of brand identity, I often think of the “closed eye rule.” Close your eyes and imagine Whole Foods, now Target, even 7-Eleven. The majority of consumers can imagine these retailers as they have done a good job building an identity. Now do the same, except imagine Sears/Kmart…I see clothes, junky stores, tools, bikes, groceries, empty shelves, dry decor, etc. Either way I think Sears is working towards improvement. It’s simply a matter of how quickly and to what extent. One more thing to think about is that once upon a time, Albertsons was a pretty respectable player in the grocery industry. They decided to make a move and bought a strong retailer with many cash cows – American Stores. A few years… Read more »
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