Will the Sears/Kmart merger succeed?

That's the question exercising financial and industry observers in the US, as well as rival retailers, with regard to the merger of Sears and Kmart to form a new company, Sears Holding Corp. Sears Holding is now America's third largest retailer, with annual revenues of around US $ 55 bn and 3 800 department and specialist stores in both the United States and Canada. The two top companies are Wal-Mart at US $ 288 bn and Home Depot at US $ 73 bn.
A transformed Kmart now stocks Sears products….
The merger was engineered by Edward Lampert, a rich 42 year-old financier, who owned shares in both companies and is now the dominant figure with a 39.4 per cent stake in the new company. He insists that he's in the game to be a successful retailer, not to make money by selling off the company or many of its locations.
The challenges are many and varied
The main Sears business consists of 870 multi-floor department stores in shopping malls, which are now losing customer traffic. Sears also operates 2 000 specialist stores in the United States and Canada – including several hundred Sears Hardware and Orchard Supply Hardware units, as well as franchised Sears stores in smaller localities, which mainly sell appliances, tools and garden equipment. But growth rates for these stores were also poor.
…as well as a huge range of Craftsman tools.
Kmart, once America's leading discounter, is now a weak third, lagging far behind Wal-Mart and Target. Many of its outlets are showing their age, and several hundred were sold off last year to Sears and Home Depot – and it is safe to assume that neither firm would have bought any poor locations.
The biggest challenge might be merging staffs and widely differing company cultures. Staff cutbacks are bound to occur. Taken together, the two company headquarters, Sears in Chicago and Kmart in Michigan, employ staffs totalling more than 6 400. The merger has already paid off for Lampert and other shareholders: shares of Sears Holding have increased greatly since the merger.
History of Kmart and Sears
Lampert bought Kmart out of bankruptcy, and began making a profit, almost entirely by cutting costs and selling off stores. While he earned millions, Kmart stores saw little improvement.
Over the past half-dozen years, Sears began to open stores outside the shopping malls. But this was done so tentatively that it is operating less than two dozen single-floor big boxes so far. It is still not clear which format might succeed. The first such venture was The…