(Photo: Gregory Bull/AP Photo)

Last week’s Sears-Kmart merger was a win for Martha Stewart—the value of her Kmart stock jumped $33 million the day it was announced. But is the $11 billion retail marriage actually a good thing?
Billionaire financier Eddie Lampert, who orchestrated the deal, has a record of snapping up undervalued assets and making them rain cash, but his ability to sell lawn mowers and linens is untested. Lampert spoke to New York’s James J. Cramer.

You’ve heard criticisms like “two drunken sailors, Kmart and Sears, trying to prop each other up. What do you say to skeptics?
Many analysts said Kmart would never emerge from bankruptcy. Next they said Kmart would never make it through our first holiday season. Then that Kmart was a real-estate play without a retailing strategy. We’ve been dealing with naysayers for some time.

How can you take on Wal-Mart?
The American consumer values choices. Kmart, in the recent past, chose to take on Wal-Mart head-to-head and was unsuccessful. To the extent that Kmart can differentiate—provide different merchandise, better service—it has a chance to compete.

You say Kmart wasn’t a real-estate play.
What I focused on when I invested in Kmart was the potential for a revitalized retail operation. We didn’t even do a separate valuation of the real estate.

Some Kmart shareholders liked the idea that you were going to turn Kmart into the next Berkshire Hathaway. Now some have said you’ve abandoned that vision for a future in retailing.
The key for any company to create value is having a profitable core business. Berkshire Hathaway has a reinsurance business—Kmart’s combination with Sears makes its retail business stronger. We’ll be able to allocate the cash that business generates to the highest returns we can find—renovating stores, acquiring other businesses.

Do you watch the Sears-sponsored show Extreme Makeover: Home Edition?
No, but I need to start immediately.

Related:

• Archive: “Intelligencer Features”
• Articles by James J. Cramer
• Table of Contents: Dec 6, 2004 issue of New York | Subscribe!