The deal Stanley Black & Decker (NYSE: SWK) made for Craftsman tools with Sears Holdings (NASDAQ: SHLD) is really a win-win for both sides, even if it does augur the end of the latter. In that it takes away yet another reason to shop at Sears — and Craftsman tools was arguably one of the strongest reasons to visit to the failing department store chain — it’s truly only a matter of time before the retailer collapses.
Yet there’s no guarantee Stanley will be successful, either. It does bring in a notably strong, respected name in tools that further bolsters a portfolio that includes not only its own name brands Stanley and Black & Decker, but also powerhouses like DeWalt, Porter-Cable, and Mac Tools. But given that Craftsman is a Sears house brand — and one that it will continue to sell — major third-party distribution outlets might not be so eager to add its name to their inventories.
For example, Home Depot (NYSE: HD) and Lowe’s, which do largely carry the various Stanley brands and others, might not be so quick to accept the Craftsman lineup as well as it will compete against their own store brands of Husky and Kobalt, respectively.
In reality, just a handful of companies make most tools that are then sold under their respective brands. For example, Snap-On used to make Lowe’s Kobalt brand, then Danaher did; but today, they’re made by Chinese tool manufacturer Chervon, which also owns Skil and Skilsaw, and is an OEM for Bosch power tools, too. Hong Kong-based Techtronic Industries makes branded power tools for Milwaukee, AEG, and Ryobi. Emerson makes wet/dry vacs for Home Depot’s Ridgid brand, but also Craftsman. And Stanley makes Home Depot’s Husky brand of hand tools.
It’s that last point, among others, that raises the question of whether Home Depot in particular would want another rival’s brands on its shelves. The deal Stanley structured to acquire the Craftsman brand certainly protects it from any financial woes Sears Holdings will encounter in the future, but if it cannot broadly introduce the brand into national retailers, this may not turn out to be the smart acquisition it seemed at first glance.