Sears utilization of Land’s End Brand Equity makes the Restoration Hardware acquisition something other than a “retail” play

Implications: -Sears has done nothing to maximize, let alone exploit the Land’s End Brand. This is really one of the most overlooked stories in the retail sector since the acquisition by Sears.

Analysis:  

-With the stock price at a low due to the housing crunch it is hard to argue the financials of this deal. In the order of magnitude what is a little over $265,000,000 to SHLD.

-Perhaps Ed Lampert will decide to follow Catterton’s game plan and forecast a 10% top line increase in sales based on the expedited increase in driven by the direct business. RSTO under Catterton’s direction was to increase pages and distribution almost exponentially to get the assortment in front of the consumer’s eyes.

-With RSTO’s CAGR in the last 3 years at 19% and direct at 46% during the same time there is a compelling reason for the acquisition. RSTO took a comparable beating on their ROIC but should see improvement as the catalog expense will now start reaping the benefits.

-The bottom line is that the assortment is what always separated RSTO from WSM and Crate & Barrel, their main competition. With out G.Friedmans merchandising eye and expertise it will be a challenge to keep the assortment compelling. Friedman is to RSTO what Mickey Drexler is to J. Crew, Reed Krakoff is to Coach and on and on.

-Among the positives is that RSTO owns and operates Michaels Furniture which is domestically made and this, if marketed correctly will give RSTO a nice hook.

-The question returns to, why is there not a 15,000 sq/ft Land’s End shop in shop in all Sears locations and will they squander the RSTO nameplate as they seem to have with Land’s End?