How Sears Bungled Its Exclusive Deal With BONGO

Last Updated Jul 14, 2010 7:00 PM EDT

Audrina Patridge sexyIconix Brand Group (ICON) signed a long-term direct-to-retail license agreement with Sears (SHLD) to sell its junior brand BONGO exclusively in Sears and Kmart stores. Smart of Sears to snap up such a sexy collection all for itself, but to sell it in both of its chains? Not so much.

Iconix owns a lot of popular brands and has successfully negotiated deals to sell Candie's and Mudd at Kohl's (KSS), Danskin at Walmart (WMT) and scored a major coup with Madonna's Material Girl junior collection for Macy's (M).

This latest roll of the eight ball as Sears chairman Eddie Lampert deploys a scatter shot strategy to beef up the company's fashion cred may fall short though. Sears' other efforts include opening a design office in San Francisco (why bother if you are in talks to ink an exclusive deal with an already established brand?) and bringing back John Goodman to serve as EVP of apparel and home.

Sears would have done better to pick one of its chains and make BONGO a real exclusive. Analysts at Retail Sails estimated when Iconix's brand Mudd went exclusive with Kohl's in late 2008 its sales went from about $100 million to $500 million in less than two years. By going exclusive with BONGO, they estimate Sears can easily do well over $200 million in the first year alone.

But given that Kmart is doing slightly better than its parent in apparel (comps were up 3.2 percent over 2009) and the chain is getting ready to launch a huge makeover of its junior department -- killing its Piper & Blue line, shoving Route 66 into women's and rolling out an extensive collection with teen star Selena Gomez -- it would seem wiser to lower revenue expectations and save BONGO for distribution in Sears stores only.

Before that can happen, it would mean Sears has to clean up its act in a hurry -- starting with its shabby stores. No one wants to paw through dingy departments, even for discount merchandise. Sears would also do well to rethink its denim initiative -- a move better left to retailers known for peddling jeans like the Gap (GPS) â€" and stick to giving its proprietary brands such as Apostrophe the kind of trendy-yet-classic injection akin to Lands' End's Canvas line.

In fact, if Lampert's serious about his latest claim to make Sears into something "unrecognizable" to long-time customers he needs to helm the kind of smart transformation that toes the line between traditional offerings and a well-curated portfolio of exclusive brands. Once done, shoppers will be delighted to open their wallets and fatten his bottom line.

Image via Iconix