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Sears plans to franchise auto centers

Bob Moon Feb 18, 2010

Sears plans to franchise auto centers

Bob Moon Feb 18, 2010


Kai Ryssdal: Not for nothin’ but have you been to Sears lately? Ten or 15 years ago the answer for a lot of us would’ve been yeah, sure. Today, traditional department stores just aren’t all that. So Sears has been working on ways to extend its most popular brands outside its stores. A couple of days ago, it announced plans to market Die Hard batteries through some other retailers. And today it launched a new plan to franchise its Sears Auto Centers.

Here’s our senior business correspondent Bob Moon.

BOB MOON: When billionaire Eddie Lampert merged Sears with Kmart five years ago, many investors expected he’d spin off the most valuable parts of the stores — brand names like Kenmore, Craftsman and Die Hard. The parts were considered more valuable than the once-popular department store and discount chains themselves.

CHAD BRAND: People got really excited, myself included. I was a shareholder back then as well.

Chad Brand runs Peridot Capital, an investment advisory firm. He says over time, he sold his stock.

BRAND: The evolution of the company was just slow. They did very little, if anything.

Chicago-based retail analyst John Mclaniphy says customers have also been losing patience with the way the stores have been allowed to languish. He says these new moves may show that Sears is now heading in the direction many expected.

JOHN MCLANIPHY: Their sales have been declining, and their market acceptance has eroded, so, you know if they’re not going to take on the whole and solve the problem with the whole, then they need to take the parts, the strongest parts, and maximize sales and customer acceptance from those parts.

Franchising lets Sears focus on cash flow with lucrative fees and a share of the profits, while franchisees invest in establishing new stores.

Sears Auto Centers used to be profit centers, but management problems have hurt sales in recent years.

Retail consultant George Whalin thinks this move might change that.

GEORGE WHALIN: They’re certainly well-known for their auto centers, they’re certainly well known for their auto service. So I think putting somebody, you know, a franchisee who’s vested, has a vested interest in the success of the thing is a good idea.

And if it’s successful enough, the whole auto center business could eventually be spun-off, just as some investors expected all along.

I’m Bob Moon for Marketplace.

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