It's been a few months since Sears and Kmart merged to create Sears Holdings (NASDAQ:SHLD). About the only thing that the two had in common back then was that they were fading retailing giants, banished to the land of laggards by Wal-Mart (NYSE:WMT). Now the companies are looking to combine their most successful brands across both chains. That will blur each retailer's identity. Will it also mean that one of the store brands about to get axed?
Shareholders in Martha Stewart Living Omnimedia (NYSE:MSO) would love seeing Martha's branded housewares eventually make their way into Sears department stores, while Kmart stores could end up stocking Kenmore appliances and Craftsman tools. But what's the point?
Once Sears and Kmart have integrated the best that each has to offer, one store brand is going to have to die. The two will be practically indistinguishable. It's the only way this project can end. And if it happens, hardly anyone would be shocked to see the surviving Kmart locations rebranded as Sears in a couple of years.
This is Sears Holdings, not Kmart Holdings. Yes, some larger companies have taken on the corporate name of their smaller acquisitions. But in those rare cases, like when like First Union bought Wachovia (NYSE:WB) and kept the name, it's because the smaller company's brand was golden. In some circles, Kmart is still poison.
I'm not just being cruel. Last month, Nike (NYSE:NKE) kicked Sears to the curb, fearing that its distribution deal with Sears would bleed over to Kmart. It didn't want to be associated with that brand.
Kmart's shares had been rising before the merger, but it wasn't because the market was suddenly optimistic about the company's chances. It was because Mr. Market had come to embrace the value of the real estate that Kmart was sitting on.
It let Wal-Mart become the low-cost leader. Despite teaming up with classy celebrities like Jaclyn Smith, Kathy Ireland, and Martha Stewart for exclusive product lines, it still failed to nail the "cheap chic" format that allowed Target (NYSE:TGT) the ability to grow without the need to undercut Wal-Mart on pricing.
Will the last person to leave the Kmart brand please turn off the blue light?
Some other blue-light editorial specials:
- When Nike was thinking about bailing out of Sears before its brand image was tarnished, it just did it.
- Wider distribution of Martha Stewart Living wares should be a good thing.
- The merger between the two struggling retailers drew interest at first, but maybe Kmart is the softer side of Sears.
Longtime Fool contributor Rick Munarriz wouldn't mind if his own product lines were on the Kmart racks. Now he just needs the product lines. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
