Stanley Black & Decker's acquisition of the Craftsman brand from Sears Holdings could breathe new life into the tool line but may be one more step toward the demise of the department store chain, experts said Thursday.
The $900 million sale announced Thursday will provide a cash infusion for Sears, but it comes at a cost — broadening distribution of the well-known brand gives consumers one less reason to choose to shop at the struggling Hoffman Estates, Ill.-based retailer.
"This is going to be good for Black & Decker and bad for Sears," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment banking firm. "Sears is going to lose exclusivity, and Black & Decker is going to gain a great name and great opportunity."
Though Stanley Black & Decker is based in Connecticut, it has key operations in Maryland, where it employs nearly 1,900 people, a company spokesman said. The company's tools and storage business is headquartered in Towson, and Craftsman will become a part of that business unit once the deal is finalized, said the spokesman, Tim Perra. The company also has manufacturing operations in Hampstead.
In a morning conference call, Stanley President and CEO James Loree said the company plans to increase capacity and employment at some U.S. facilities.
Perra said it's premature to comment on potential impact on the Towson operations because the deal hasn't closed. Towson had been the headquarters of Black & Decker before it merged with Stanley Works in 2010.
Additionally, the tool maker plans to open a new, high-tech manufacturing plant in a location to be determined.
"To accommodate future growth, we intend to increase our manufacturing capacity in the United States, consistent with our philosophy to 'make where we sell' wherever possible," Loree said.
The sale of Craftsman comes as Sears struggles to stay afloat and remain relevant to consumers amid flagging sales and growing online competition.
Separately, Sears announced Thursday that it is closing 150 stores — 109 Kmarts and 41 Sears — most of which were disclosed separately over the past two weeks. The only store closing in the Baltimore area is the Kmart at 222 North Point Blvd. in Dundalk.
Sears said those stores generated about $1.2 billion in sales in the past year but lost about $60 million.
"Many of these stores have struggled with their financial performance for years, and we have kept them open to maintain local jobs and in the hopes that they would turn around," Sears CEO Edward Lampert said in the news release announcing the closings. "But in order to meet our objective of returning to profitability, we have to make tough decisions and will continue to do so, which will give our better-performing stores a chance at success."
Sears had closed more than 200 Kmarts in 2014 and 2015, including several in the Baltimore area, so the only remaining Kmarts in the region will be in Crofton, Edgewater, Parkville and Pasadena. Sears stores remain at Hunt Valley Town Centre, Harford Mall, Eastpoint Mall, Security Square, The Mall in Columbia, Marley Station mall, Westfield Annapolis mall, and TownMall of Westminster.
Sears announced in May that it was looking for ways to wring more cash from some of its best-known brands, including Craftsman, Kenmore and DieHard.
The Craftsman sale will give the retailer more cash to fund its operations while it tries to halt sliding sales. During the first two months of the fourth quarter of 2016 — part of the all-important holiday sales season — sales were off about 12 percent to 13 percent at stores open at least a year, Sears said.
Affiliates of Lampert's hedge fund, ESL Investments, agreed to lend the company up to $500 million, backed by mortgages on Sears' properties, earlier this week while Sears works to sell real estate to pay back debts. Their loans to the retailer add up to more than $1 billion since September 2014.
Sears has created a committee to market certain real estate properties and aims to raise more than $1 billion, the company also said Thursday.
When the deal with Stanley closes later this year, the retailer will receive $525 million. Stanley will pay another $250 million after three years. Sears also will get a percentage of Stanley's sales of Craftsman products for 15 years, and during that time Sears will continue selling Craftsman products royalty-free.
But Sears will lose the exclusivity it had with Craftsman as consumers likely will be able to find the tools in home improvement chains and through other channels, Davidowitz said.
"This is another step in the liquidation of Sears," he said. "Sears is selling the best assets they have to stay alive another day."
The sales potential of Craftsman depends on how the product is marketed and priced compared with other brands, Davidowitz said. Stanley will likely sell in the same stores where its current brands are sold, such as Home Depot and Lowes, he said.
"This is a line extension for them," he said. "They should be able to do well. Craftsman is more powerful than the brands they have and more well-known to the consumer."
Currently, about 90 percent of Craftsman products are sold through Sears, Kmart and Sears Hometown stores, Loree said. Much of the 10 percent sold outside Sears-related channels is sold through Ace Hardware stores.
Loree said he thinks Stanley can increase sales by making Craftsman available outside Sears stores and estimated the brand could add about $100 million of revenue growth per year for the next 10 years.
Ed Callahan, co-founder and creative strategist at Baltimore-based advertising agency Planit, said Craftsman has suffered from image problems despite making innovative and quality products that come with a lifetime guarantee.
"It's unfortunate that people don't see it because no one goes into Sears," said Callahan, a longtime Craftsman tool user.
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But Stanley should be able to boost brand visibility and help introduce what is viewed as a dated brand to a new generation of customers, he said.
"Stanley knows how to market, and they know how to grow a brand," Callahan said. "They're buying a solid platform of tools that's kept up to date and innovative, but it needs that new spark in the marketplace to bring it to light."
Loree said the deal was structured to protect Stanley from risks related to Sears' uncertain future. Stanley isn't taking on any contractual credit risk from Sears and isn't obligated to become a bigger supplier.
"We think the risks are manageable and contained, and the opportunity is immense," Loree said on a conference call Thursday.
Loree likened the Sears catalog of 40 or 50 years ago to the role e-commerce plays today.
"The world has changed, but Craftsman is still an incredibly strong brand," he said.
Chicago Tribune reporter Lauren Zumbach contributed to this article.