A Fool Looks Back

The harder side of Sears
What's better than running a thriving retail establishment? The answer, of course, is running a struggling retail establishment. Just as the steak-rich but profit-poor Smith & Wollensky chain of upscale chophouses triggered a bidding war earlier this year, now it's Restoration Hardware's (Nasdaq: RSTO  ) moment to shine.

Just days after the struggling home-decor retailer announced a private-equity buyout bid, Sears (Nasdaq: SHLD  ) has stepped into the picture after acquiring a nearly 14% stake in Restoration Hardware.

Will Sears be making a higher buyout offer? This obviously isn't a passive investment in a chain that is on the cusp of disappearing into the private-equity realm. With its foot in the door, the department-store pioneer will quickly study the numbers to see if a bidding war is worth breaking into.

If so, it won't be the first time that Sears has tried to go upmarket through a beefy purchase. I'm not talking about Kmart here -- I said "upmarket," OK? I'm talking about its purchase of Lands' End five years ago. This would be along those lines. Restoration Hardware is a chain that could thrive under Sears' financial footing. It would also work as a store-within-a-store concept to upgrade the namesake chain's own home furnishings.

In other words, Sears has more to gain than a private-equity buyer. Let's watch how it goes. If Sears comes up empty, we'll see if it goes after another struggling player like Pier 1 (NYSE: PIR  ) .

Briefly in the news
And now, let's take a quick look at some of the other stories that shaped our week.

  • Ready to curl up with a good e-book? (Nasdaq: AMZN  ) introduced its Kindle electronic reader on Monday. The first batch sold out briskly, but is the market ready for a $399 reader? It has some cool perks, but do I really want to take a Kindle -- and a $10 downloaded e-book -- to the beach or on the bus? This is a $409 book I'd be carrying. If anyone can make this work, it'll be Amazon, but it's going to be an uphill climb.
  • GameStop (NYSE: GME  ) is my favorite bellwether for the video game industry. It's the top, pure, agnostic gauge of the sector. The company posted a great quarterly report but tempered expectations for the holiday season. Who are we kidding here? The consoles are coming through with attractive price cuts. New games like Viacom's (NYSE: VIA  ) Rock Band and Activision's (Nasdaq: ERTS  ) Guitar Hero III are winning non-gamers over at higher price points than typical software titles. I know I should listen to the bellwether, but I'm hearing cash-register bells in my head, instead.

Until next week, I remain,

Rick Munarriz

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