Possible Sears' bid for Restoration Hardware gets mixed reviews
CHICAGO -- For months, Wall Street has been waiting for hedge fund wizard Ed Lampert to reveal his plan to turn around ailing retailer Sears Holdings Corp.
Investors got their first puzzling clue to his plan Monday evening when Sears disclosed it had amassed a hefty 13.67 percent stake in Restoration Hardware Inc. and was mulling a possible acquisition of the retro-themed retailer.
Some analysts are questioning why Sears' chairman would set his sights on a comparatively small company with few real estate assets at a time when the nation's housing slump is causing heartaches across the retail industry.
"I think it's an insane idea," said Howard Davidowitz, a retail consultant who is chairman of Davidowitz & Associates. "If you're trying to turn around Sears, why would you buy a company in the worst segment of retailing?"
Sears spokesman Christian Brathwaite and Corte Madera, Calif.-based Restoration Hardware spokeswoman Christine Greany declined to comment Tuesday.
Hoffman Estates-based Sears spent about $30 million to acquire 5.3 million shares of Restoration Hardware, including 3.4 million shares it purchased earlier this month, according to regulatory filings.
Restoration Hardware, which earlier this month said it planned to sell itself to private equity firm Catterton Partners for $267 million, operates about 100 stores and racked up $713 million in revenue last year. Comparatively, Sears Holdings, which includes the Sears stores and discount chain Kmart, had net revenue of $53 billion.
Analysts speculated a possible acquisition of Restoration Hardware would give Sears an important high-end brand name after its licensing agreement with Martha Stewart expires in 2009.
"I think it's a great idea," said George Rosenbaum, chairman of Leo J. Shapiro and Associates, a Chicago-based consumer research firm. "I think it would fit very, very well with Sears' efforts to make their store more interesting, to attract younger people, and it plays to their strength of hard goods."
Restoration Hardware has until Dec. 13 to solicit competing proposals to Catterton Partners' buyout offer.