Looking to breathe life into its apparel sales, Sears, Roebuck and Co. yesterday announced the purchase of Lands' End Inc. for about $1.9 billion.
The transaction has been approved by both boards and is expected to be finalized next month. Lands' End will continue to offer its product line through its catalogs and online, and will become a wholly owned subsidiary of Sears remaining in Dodgeville, WI.
Sears will offer $62 per Lands' End share.
A report characterized the deal as ending “years of speculation” regarding talks of a merger as Lands' End considered opening its own stores while Sears is overhauling its clothing unit, which has underperformed compared with its appliance and tool business.
Sears, Hoffman Estates, IL, is expected to complete product rollout to stores by fall 2003. It will carry an assortment of Lands' End clothing along with footwear, home fashions and accessories. Lands' End items will debut in Sears stores this fall and will reach 15 percent to 20 percent of the apparel space by fall 2003.
“People would go to Sears to buy tools and walk by the clothing,” said Lee Lodes, a group director at branding consultancy Interbrand, New York. “Sears can become a destination for people looking for Lands' End merchandise, but they must properly manage the brand. It's clearly a step in the right direction. They also needed it to compete with Kohl's and retailers that have brought in brands.
“Lands' End immediately gets distribution, and people will purchase their goods using Sears credit cards.”
David F. Dyer, Lands' End president/CEO, will continue to lead the Lands' End business and will report to Sears chairman/CEO Alan J. Lacy after the deal closes. Dyer will assume responsibility for Sears' existing customer-direct business, which includes sears.com, catalogs and specialty merchandise.
Sears reportedly has been losing ground to Wal-Mart, Target and others largely because of weakness in its apparel segment. Lacy has called Sears clothing “dowdy” and considered eliminating the segment when he took over the company less than two years ago.
Lands' End spokesperson Emily Leuthner confirmed that the deal was meant to boost Sears' apparel segment and that the opportunity for growth was a major factor in the transaction from Lands' End's standpoint.
“Lands' End, being in direct marketing, is limited to 10 percent of the potential of the entire base of retail,” she said. “This will allow the brand to be entrenched in an extremely larger body. Lands' End products will begin showing up in Sears stores this holiday season. It won't be the full product line, but it will be the core product — the traditional products.
“Lands' End has been considering ways to get into that other 90 percent. Sears plans to utilize the existing operations that Lands' End has in place.”
She was asked whether Lands' End had considered establishing its own retail presence.
“It never really hit the ground,” she said.
Kurt Barnard, president of Barnard's Retail Trend Report, Upper Montclair, NJ, described the deal as a win-win for both parties equally.
“Sears gains one of the best names in apparel retailing and becomes a very formidable player in the fashion apparel retail marketplace, and Lands' End gains exposure for its merchandise in 870 department stores around the country,” he said. “The impact on Sears' apparel will be minimal for the next few months. But by next year we will see major, major changes.
“Sears also [last month] announced a new private label line, Covington, and it also is a very classic kind of look, so the two will dovetail extremely well. Sears is going to gain millions of new shoppers — no question about it. [They will be] Lands' End customers who previously wouldn't have thought about setting foot in a Sears store.”
Sears spokesperson Peggy Palter discussed two major factors.
“We want to grow our customer-direct business, and we've also stated that we need to have a greater draw in our apparel area in order to position our full-line stores,” she said. “When we looked at Lands' End customers, they are virtually identical to our hard-line customers — people who predominantly buy appliances. We want to encourage this group to shop across the house.
“We don't expect to see Sears merchandise in Lands' End catalogs.”
She added that links will be provided between both companies' Web sites.
In other Sears news, Sears Canada said it agreed to become the exclusive Canadian retailer for the Martha Stewart Everyday brand label, according to reports. Terms were not disclosed.