Yes, but will it work?

It's official: K-Mart's acquisition of Sears, first announced last November, is now a done deal.

But will it really save either struggling retailer?

The theory seems to be that by creating a single WalMart-sized company, the merger will create WalMart-sized economies of scale. And the architect of the deal -- financier Eddie Lampert, who bought K-Mart out of bankruptcy in 2002 -- is viewed as a sort of retailing wunderkind to boot. After all, K-Mart actually posted a profit last year.

Except that, as readers of the above-linked article will discover, there's more to that profit than meets the eye. Most of it comes from selling off some of K-Marts impressive real-estate assets. When it comes to real sales figures -- which you would think would be a good indicator of the health of a retailer -- K-Mart is still very much in trouble.

Meanwhile, the Cranky Economist is left wondering: The economies of scale that have made WalMart and Target so successful are based on the fact that both buy enormous quantities of the same types of goods -- discount merchandise. It isn't just that they're big boys. They're big boys on a particular block. Will the "bigger K" be able to do the same?

The new K-Mart/Sears duo won't have the same kind of clout. Sure, it'll be tremendous in terms of market cap and store locations. But it will be divided between the discount retailer and the slightly more up-market component. This might be trumpeting my ignorance of retail, but I'm not sure where the combination adds much to either side of the equation. At the same time, I also don't see where any synergy between the two will come from. Perhaps there's a market for Martha Stewart linens and JoeBoxer underwear in Sears. But Craftsman tools and Kenmore appliances in K-Mart? Doubtful. (For the record, Cranky Dad suggested a few months ago that they develop a Martha Stewart-Craftsman Jailbar Hacksaw line. I'm sure that would be a real winner.)

Arguably this merger would be defensible if both companies were coming to the table from positions of relative strength. But I've got to wonder whether it's really a wise idea for them to attempt it right now.