CHICAGO — Sears Holdings is looking to generate more cash from its trusty Kenmore, Craftsman and DieHard brands than the sale of washers and dryers, tools and car batteries in its own stores.
The embattled retailer announced Thursday that it was exploring unspecified alternatives for those brands, along with its Sears Home Services business, by expanding their availability beyond the doors of Sears and Kmart. The disclosure came as the retailer, based in suburban Chicago, reported another bad quarter for both its Sears and Kmart units.
“Our iconic KCD brands are beloved by the American consumer and we believe that we can realize significant growth by further expanding the presence of these brands outside of Sears and Kmart,” the company said in its earnings release. “By evaluating potential partnerships or other transactions that could expand distribution of our brands and service offerings, we can position both businesses to achieve greater success.”
While not specifying what options were under consideration, they potentially could involve selling the products in other stores, licensing them to other companies or an outright sale. Sears said it has retained Citigroup Global Markets and LionTree Advisors to help explore options.
Although the Kenmore, Craftsman and DieHard names have faded a bit as the overall Sears brand has diminished, they are still well-established brands with strong reputations, said Neil Stern, senior partner at Chicago-based McMillanDoolittle.
Expanding distribution would likely bring in extra revenue, Stern said. But if you can buy Kenmore and Craftsman elsewhere, that’s one less reason for shoppers to come to Sears, he said.
Sears was once a primary destination for appliance sales in the U.S., largely on the strength of its Kenmore brand, once one of the top two major appliance brands in the U.S., according to market research firm Euromonitor International.
Now sales are shifting to home and garden specialty retailers like the Home Depot and Lowe’s, which accounted for 34 percent of major appliance sales in 2015, according to Euromonitor.
Kenmore’s share of the major appliance market dropped to 12.7 percent for the 12 months ending in March, down from 17.4 percent five years ago, when it had the largest slice of the market, according to Louisville, Ky.-based Stevenson TraQline’s quarterly market survey. But it’s still the third-biggest player, behind General Electric and Whirlpool.
Craftsman still accounts for the largest share of the hand tools and accessories market by dollar share, with about 28.5 percent, and accounts for about 9 percent of portable power tool sales, with both categories down between 4 and 5 percent over the last five years, said Stevenson TraQline.
DieHard had only about 5.2 percent of the auto battery market, according to Stevenson TraQline, though nearly 30 percent of people surveyed said they didn’t know their car battery brand.
“If Craftsman is in independent hardware stores, it’s probably not a bad thing for the company to explore. If they do a deal with the Home Depot or Lowe’s, that’s also heavily into your appliance business; that could really siphon traffic away from stores,” he said.
It’s not the first time the retailer has turned to the brands to bolster sales. In 2011, Sears signed deals to sell Craftsman tools at Costco clubs nationwide and DieHard car batteries to Meijer. It also expanded a pilot that put Craftsman at 1,000 Ace Hardware stores and reportedly considered selling certain Kenmore products at Costco.
The Craftsman pilot marked the first time in the brand’s 83-year history shoppers could buy it outside a Sears-owned store.
Sears had considered such deals before 2011 but worried about cannibalizing sales at its own stores. At the time, the Craftsman brand manager said the Costco deal would attract new customers since many Costco shoppers weren’t coming to Sears or Kmart.
Today, more than 2,800 Ace Hardware stores sell Craftsman and some DieHard products, said Sears spokesman Howard Riefs. Blaine’s Farm and Fleet and Atwoods Ranch and Home also sell some categories of Craftsman products, and all three brands are available in more than 50 countries, Riefs said.
But Sears only sells a portion of its branded products through other retailers and believes a partnership or other transaction expanding distribution of its brands and service offerings could help both parties, Riefs said.
“Sears is the only place you can get the full assortment of Craftsman, Kenmore and DieHard products,” he said.
J.C. Penney recently announced it would begin competing with Sears in the major appliance category, selling online and in half its stores. Sears announced a new small-format store dedicated to appliances in Colorado earlier this month, and Chairman and CEO Edward Lampert has said the company could add more locations.
Last month, Sears also announced it would update the Kenmore, Craftsman and DieHard brands with new “connected home” products, including an air conditioner and water heater that can be monitored and controlled from a smartphone to save energy, and a riding lawn mower that can send maintenance notifications to a smartphone.
But the company also said appliance sales declines contributed to shrinking same-store sales at Sears stores, along with apparel, consumer electronics, footwear and sales at Sears Auto Centers.
Sales at U.S. Kmart stores that have been open at least a year fell 5 percent, compared with the first quarter of 2015. Sales at Sears stores were down 7.1 percent.
Sears lost $471 million, or $4.41 per share in the period ending April 30, up from a loss of $303 million, or $2.85 per share, last year.
Apparel sales at both stores have taken a hit from competitors’ heavy promotions, Lampert said in a statement Thursday.
Sears Home Services, which provides in-home delivery, installation, repair and home improvement services, also “has greater potential than what we have delivered in the past,” the company said.
Sears has said it is targeting at least $300 million in asset sales during 2016.
“We remain focused on restoring Sears Holdings to profitability by concentrating on our best stores, our best members and our best categories through innovative solutions leveraging our Shop Your Way membership program and our Integrated Retail offerings,” Lampert said.
Sears also said Chief Financial Officer Robert Schriesheim will leave the company to pursue other business interests and career opportunities. He will remain at Sears until a replacement is found and will continue as an adviser to Sears through Jan. 31, 2017.
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