We like to watch the news. Lately, we keep seeing a lot of news (typically not good) about Sears Roebuck & Co. and Craftsman Tools... and the news hasn't been so hot. Our desire for writing this article started off when we noticed Craftsman tool showing up in Menards - and this after the brand was allowed to be sold in local Ace Hardware stores just a short while ago. Then, there is the history of some odd CFO turnover in the company over the past several years, and things got even more interesting when a local K-Mart-turned-Sears Essentials turned back into a K-Mart... Then last week, in yet another turnover, the president of Sears Holdings Corp.'s Kenmore and Craftsman brands, Scott J. Freidheim, sent in his letter of resignation after taking the job just 7 short months ago. In the SEO filing (which is mandatory in publicly traded companies) Scott's reason for resigning was "to pursue another opportunity". So this begs the question: What the heck is going on with Sears?

Curiosity #1 - Executive Turnovers Galore

Since 2005 Sears has been going through CFOs and executives like a starving man through a loaf of freshly-baked bread. If you look through the recent timeline of the company, here is a brief summary of what you'll see:

2005

• Edward Lampert bought Sears Roebuck & Co.
• Sears merged with Kmart to create Sears Holding Corp. (Sears)
  
• William Crowley named CFO for Sears
• Mindy Meads resigns as Lands End CEO (Lands End was purchased by Sears in 2002 for around $2 billion)
• David McCreight named CEO of Lands End
  

2006

• William Crowley promoted to Chief Admin Officer for Sears
• Craig Monaghan named CFO for Sears

2007

• Craig Monaghan resigns as CFO for Sears
• William Crowley returns to (interim) CFO position for Sears
• William Phelan elected SVP and controller of Sears
  
• J. Miles Reidy named CFO for Sears

2008

• David McCreight resigns as CEO of Lands End
• J. Miles Reidy resigns as CFO for Sears
• Michael Collins named CFO for Sears
• Nicholas Coe named CEO for Lands End

2009

• Scott J. Freidheim named Executive VP of Operations for Sears
  

2011

• Scott J. Freidheim named president of Kenmore appliances, Craftsman tools and DieHard auto batteries
• Michael Collins resigns as CFO for Sears
• William Phelan (who was the Controller for Sears) named interim CFO for Sears
• Nicholas Coe resigns as CEO for Lands End
• Edgar Huber, former executive with Liz Claiborne, Inc named president and CEO of Lands End
• Scott J. Freidheim resigns as president of Kenmore appliances, Craftsman tools and DieHard auto batteries
• Mike Castleman, vice president and CFO, named interim president
• Robert Schriesheim named executive VP and CFO of Sears
  

This isn't just a few turnovers. This is evidence of a company in utter turmoil. This is Titanic in importance, and the only question remains: can Sears pull out of this tailspin, or are they headed for a complete restructuring as a company?

Curiosity #2 - Dilution of the Craftsman Brand?

We're not one to micromanage a company, especially one as large as Sears, however the Craftsman brand, once unique to Sears seems to be diluting itself - at least in terms of where it is being sold and marketed. Once unique to Sears, Craftsman is now found at Ace Hardware and, of late, Menards. Referring to the latest move to Menards, Larry Costello, a spokesman for Sears Holding Corp., stated that this is "simply a test to understand how the brand sells at that retailer." This experiment at Menards might just be the beginning of a new strategy for Craftsman. Traditionally it was only available in Sears and, more recently, K-mart stores. Now with Ace Hardware and Menards, the brand looks to be going for a wider distribution, similar to other tool brands. The only difference, of course, is that other tool brands aren't tied to a retailer like Sears. This begs the question: are we looking at a potential spin-off of the Craftsman brand, and if so, will it be able to compete without a wider distribution in the larger home improvement centers and dealer networks that seem to corner the market on retailing power tools?

Of late, Sears seems to be re-branding itself as "America’s Tool Headquarters". This means that their recent tool catalogues have been chock full of tools of many flavors. This is a far cry from older catalogues which were simple full-line Craftsman brochures - something that fans of the brand really enjoyed. It seems that Sears and their Blue (Tool) Crew is decidedly moving Sears into a direction where the company is more than just the Craftsman brand - at least with respect to tools. How this plays out, we'll just have to see.

Curiosity #3 - Sears Home Essentials or K-mart?

As we mentioned earlier, a local K-Mart in our area had turned itself into a new Sears Essentials store. This occurred after K-mart was purchased by Sears. Well, after only a couple years, it turned back into a K-Mart. It just didn't make it. Why? We're not sure, but we do know that Sears Essentials wasn't properly marketed - at least not in our market. As a company, Sears' performance as a publicly-traded company is definitely on the downslide. The company showed a $170 million loss in the first quarter of this year, citing weak sales. As a result, shares dropped around 20% in the past year, continuing an almost 60% drop since 2006. To add insult to injury, Standard & Poor's Rating Services downgraded the company's credit rating to a B+, which is far below levels designed to encourage much new investment.

There have been lots of dips across the S&P, Lowe's, and Home Depot,
but Sears is unique in that it is staying down as opposed to recovering as the others have.

So we're not really sure what's up, but this is certainly something to keep your eyes on. Is Sears in trouble? If they are, would the Craftsman brand be better off as its own company? If it is, what can we expect to see in terms of distribution and further spreading of the brand? How much more innovation and development can we expect from Craftsman as part of Sears as opposed to its own company? All I know is - these are tough decisions and I'm glad I'm not the CEO... I might just jump ship, too.