Has Sears Taken Another Step Toward Extinction?

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It could be the end of the line for Sears, Roebuck and Co., the legendary retailer that started out selling shovels and pickaxes to pioneers through its mail order catalog. This week, the retailer  stated that “historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” in its filing with the SEC. This after, Sears announced that it was selling the Craftsman brand  for $900 million to Stanley Black & Decker in January.

For car owners, Sears was second only to franchised dealerships as a nationwide service giant. For automotive enthusiasts, the Craftsman brand delivered entry-level tools with the promise of a guarantee for life, offering replacement even if you broke a tool on a Sunday.

For many consumers that have watched Sears degrade from a retail powerhouse to a slightly upgraded Dollar Store, the Craftsman brand was about the only reason left to ever enter a Sears location. With the sale to one of the brand’s chief competitors — Stanley Black & Decker — many saw the end in sight for Sears. This week’s annual report filing with the SEC is even more ominous.

In the retailer’s annual report filed Tuesday with the SEC, Sears added language that warns its “historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.” As a result, Sears’ already battered stock price tumbled 12.3% lower Wednesday.

The company’s CFO, Jason Hollar, wrote a blog post clarifying what the filing meant, suggesting that regulatory standards required companies to explain risks to investors. Ignore the warning that Sears may have trouble continuing as a “going concern,” Hollar said; Sears is a “viable business that can meet its financial and other obligations for the foreseeable future.”

The sale of the Craftsman brand provided a glide path for Sears to make some money into the future, according to the Chicago Tribune. “Stanley will pay $525 million at closing, $250 million after three years, and make annual payments on new Craftsman sales for 15 years, the companies said in a statement Thursday. Sears will continue to sell Craftsman products at its stores. The license to Hoffman Estates, Illinois-based Sears will be royalty-free for 15 years, and then generate 3 percent afterward.”

The trouble for Sears is that you can only do a deal like this once, maybe twice if there’s any brand equity left in the Kenmore line of appliances. It’s also not a lot of money for a brand as legendary as Craftsman. New Britain, Connecticut-based Stanley Black & Decker just paid twice that much for the Irwin and Lenox brands of tools from Newell Brands, Inc. for $1.95 billion just a few months ago. Irwin tools hang in just about every tool aisle in the country, providing locking pliers, chisels and other hand tools, along with once hard-to-find tools like screw extractors and rounded bolt extractors. Lenox is a massive provider of cutting tools, saw blades and utility knives. Neither are as recognized as Craftsman.

Sears did allow some sales of its Craftsman branded tools at other retailers prior to the sale. Ace Hardware, for example, sold Craftsman tools in its stores. But that only accounted for about 10 percent of all of Craftsman’s retail sales in any given year. This deal blows that wide open. Stanley Black & Decker sells tools everywhere, from the last few remaining mom and pop lumber yards and auto parts stores, all the way up to major retailers like Home Depot. As soon as consumers know they can purchase a Craftsman tool without entering the depressing husk of a once-proud store like Sears, they’ll shop elsewhere.

It’s good news for American manufacturing, according to Stanley Black & Decker’s CEO. “To accommodate the future growth of Craftsman, we intend to expand our manufacturing footprint in the U.S.,” Stanley Chief Executive Officer James M. Loree said in the statement. “This will add jobs in the U.S., where we have increased our manufacturing headcount by 40 percent in the past three years.”

Sears, Craftsman and cars have been joined at the hip since the dawn of the automotive age. Before Lincoln was a Ford Motor Company brand, Sears sold Lincoln Motor Works cars branded as the “Sears Motor Buggy” through its catalog. In 1952 and 1953, Sears sold Henry J automobiles branded as “Allstate” cars. For years, it used the Allstate brand on scooters from Vespa, and motorcycles from German manufacturer Puch.

From the 1950s through the early 1990s, Sears printed money in its Sears Auto Center locations. Most of its retail stores featured either standalone Sears Auto garages, or garages built into the store, and they were wildly successful for the company. But trouble arose in the late 1980s and early 1990s, when investigators revealed that heavily commissioned service advisors were overcharging for services. According to the New York Times in 1992, California’s Department of Consumer Affairs charged Sears with fraud and “moved to have its license to repair autos revoked. The action followed an 18-month undercover investigation by the Bureau of Automotive Repair; the inquiry was undertaken after a number of consumer complaints. In 38 visits to 27 Sears auto-repair shops, unnecessary service and repairs were recommended 34 times, the bureau said. In some cases, undercover investigators posing as customers were charged as much as $550 for needless repairs.”

By the mid-1990s, Sears had given up most of its automotive services, focusing on not much more than tires and batteries. A move to sell other brands brought competition for its RoadHandler tire brand. DieHard batteries were still the exclusive battery brand at Sears, but Auto Centers became less and less profitable as years went on.

RELATED: Read More About the Sears Motor Buggy

For more on Craftsman tools, check out our $200 Mechanic’s Tool Set Buyer’s guide, and a piece on the sad legacy of Craftsman tools at Car Talk.

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Craig Fitzgerald

Craig Fitzgerald

Writer, editor, lousy guitar player, dad. Content Marketing and Publication Manager at BestRide.com.