Sears and Kmart merged in 2005 and the new corporation was noted to be one of the largest retailers in the United States with over 3450 stores. Since then there has been some notable impacts on both firms. Generally the merge between the two corporations enhanced the market position. The new entity realized about $55 billion sales that made it to be the second largest retailer in the US creating a good market position to face its competitors. It also led to reduction in costs and strong management within the firms. The synergy led to reduction of in the purchasing costs because they a greater bargaining power.
However, after sometime the merger between the two firms seemed to have some negative impacts particularly on Sears. The condition of the Sears stores has been neglected and the expenditures on capital are actually below the depreciation. This has resulted to poor shopping experience and the competitors as a result have snatched a stronger advantage of attracting the customers because their capital expenditures are far beyond the depreciation.
The inventory turnover of Sears has truly declined in the past five years and is presently lower than that of the retailers selling same goods (Clifford, 2010). This has actually led to a decrease in the revenues generated by the firm. This has further resulted to an increased risk of discounting older merchandise so as to move out of the shelves. The merger has also made the revenues that are obtained from services rendered to be lower than the expected value which signifies that Sears misses the chance to sell its extended service plans. It has also led to negative free cash inflows within the firm that has prevented it from investing in the turnaround projects. The profitability levels of Sears have dramatically fallen reducing its market share making it unable to face its rival competitors (Clark, 2013).
Clifford, S. (2010, December 21). A Tough Sell at Sears. The NewYork Times, p. B1.Retrived June 13, 2013, from http://www.nytimes.com/2010/12/22/business/22sears.html?pagewanted=all&_r=0
Clark, C. (2013, January 28). Turnaround of Sears Holdings. Turnaround of Sears Holdings – Turnaround Management Association. Retrieved June 13, 2013, from http://www.turnaround.org/cmaextras/15-Sears-Holding.pdf