Word: kmarts
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Forget the accounting scandals, the CEOs fending off fraud charges, the churning stock market. The business world has become obsessed with corporate nuptials. Merger mania is back, executives are cashing out and, if history is any guide, investors should be running for cover. A couple of months ago, Kmart and Sears got engaged. Then Nextel and Sprint announced their $35 billion wedding. Johnson & Johnson is buying Guidant, a maker of medical devices, for $24 billion. Two of the splashiest deals came last week: SBC, the Baby Bell based in San Antonio, Texas, looked poised to swallow its former parent...
...snowy Chicago parking lot for Kmart, I have an epiphany: hobby shops. My confidence renewed, I make my way to two odd stores that smell like diesel and boys. Same story at both: no Polar Express trains until February. "Ha! Good luck," says the owner of Grayland Station. He slips me the card of a friend's shop that had one set as of last night. From my car, I dial my cell phone with frozen fingers. The woman who answers tells me I am lucky: I'll be No. 58 on her waiting list. The Toy Station...
...there is no denying that the merger is all about real estate. For years, Sears has claimed to be the prisoner of its once pioneering shopping-mall locations, where, in fact, Americans do less and less of their shopping, especially on big-ticket items. By transforming several hundred of Kmart's 1,500 freestanding and strip-mall outposts into New Age Sears stores, at an estimated price of about $3 million apiece, the company hopes it can finally reach its best potential customers. That assumes, of course, that those customers want to reach Sears. For even if Sears and Kmart...
Whether Sears and Kmart can do that by incorporating the best elements of much stronger brands in the industry remains unclear. "It could be more like a Bed Bath & Beyond meets Best Buy meets Target," says Marshal Cohen, chief fashion analyst at industry researcher NPD Group. "They've got a second chance here." But if Eddie Lampert can't make it work this time, it's likely to be their last.--With reporting by Jeffrey Ressner/Rancho Cucamonga and Jyoti Thottam and Dody Tsiantar/New York City
...ultimate success of the Kmart-Sears merger will depend in large part on whether Kmart has already made a leap to greatness before the merger and, equally, whether acquiring Sears meets these three tests. While I am not an expert on Kmart, its recent exceptional results indicate that it might be a sustained good-to-great case in the making. Yet at the same time, we should be mindful of the lessons of history. No single step, no matter how big, can by itself make a company great...