Sears has been in financial doo-doo for a while now. I started paying attention in 2012, when they posted huge losses for 2011. They posted losses again in 2012 and 2013, and it’s hard to imagine that they turned things around for 2014. At best, maybe they lost less money in 2014 than in previous years.
Business and financial media regularly report on Sears’ troubles, so much that the words “possible bankruptcy” get thrown around quite often. They’re not there yet, but a lot of tool users often ask the same question:
If Sears declares bankruptcy, what will happen to the Craftsman brand?
You might not know it, but Craftsman is actually now part of a Sears subsidiary, called KCD IP. The subsidiary consists of Sears’ Kenmore, Craftsman, and DieHard brands. According to a Sears document, This all happened back in May of 2006.
According to a Bloomberg article, KCD was disclosed to be a separate, wholly owned, bankruptcy-remote subsidiary.
Updated language, found in a Sears 2013 10-K filing (pg 52), says:
The issuers of the REMIC Securities and KCD Securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of [Sears] Holdings.
Note the bankruptcy remote part.
According to Wikipedia,
A bankruptcy remote company is a company within a corporate group whose bankruptcy has as little economic impact as possible on other entities within the group. A bankruptcy remote company is often a single-purpose entity.
The reverse also seems to be true. According to the Dictionary of Financial Risk Management entry,
Bankruptcy Remote Entity: A subsidiary or affiliate corporation whose asset/liability structure and legal status makes its obligations secure even in the event of bankruptcy of its parent or guarantor.
So… if Sears declares bankruptcy, then Craftsman should be protected and isolated from any of the related consequences and dealings, thanks to their inclusion in the KCD subsidiary.
When I once questioned why a certain new Craftsman tool was given estimated availability for Craftsman.com but not for Sears, it was explained to me that Sears availability depends on their buyers. To me that strongly suggested that Craftsman is being operated as an independent or partially independent company within a company. I have for a long time wished for Craftsman tools to be sold via a store-within-a-store structure, but that has yet to happen.
It’s unclear as to what might happen should Sears declare bankruptcy, but one thing is certain – Craftsman’s days are NOT numbered.
Another common question is about which company might purchase Craftsman if the brand was ever put up for sale. If Sears does collapse, would Craftsman have enough in place to stand on their own feet? These are questions for another time, but I think that Snap-on and Rubbermaid (which owns Irwin) are the 2 potential buyers who would gain the most.