With Eddie Lampert's Sears Holdings (NYSE: SHLD) being pressured to bring in the profits after the recent merger with Kmart, will the company report stellar earnings and revenues next Thursday when its Q3 numbers are due?

Whatever they may be, rumor has it on The Street today that Sears Holdings Corp. may be interested in acquiring Pleasanton, CA-based Safeway, Inc. (NYSE:SWY) in a merger of department stores and grocery retailers. Say what?

Although financier Lampert is known for purchasing assets he feels are undervalued, a merger between Sears and Safeway would be on odd case study indeed to dissect. Analysts on the Street indicated that a deal like this could be worth $20 billion.

Lampert even went as far as to say "Our strong financial position and cash flow generation provide us with the flexibility to capitalize on a wide range of market opportunities as they arise ... we are prepared to invest substantial amounts of capital if we identify other attractive investment opportunities." Hmm, that smells rather generic but also suspicious. In addition to a possible buyout of Safeway, the Chicago Sun Times reported yesterday that Sears could also be considering San Francisco-based Gap, Inc. (NYSE:GPS), Home Depot Inc. (NYSE:HD) and Anheuser Busch Cos. (NYSE:BUD).

With the grocery business having notoriously thin margins, most likely any company except Safeway would be a better bet. But Sears and Home Depot? Okay, let me close my eyes and imagine that for a second.

When you think of decorating your home, apartment or condo recently, which retailer do you think of first? Many choose Macy's, Nordstrom's (NYSE:JWN), J.C. Penney (NYSE:JCP) and even Target (NYSE:TGT). How about Sears? I'd be willing to bet that Sears does not top the "mindshare" list of retailers when home furnishing shopping trips are planned. The retailer, though, is hoping to change that.

Sears, held by Sears Holdings, Corp. (NASDAQ:SHLD), started trying to forge an image of being a place to shop for home furnishings a few years ago -- but in my opinion, the chain has had little progress at this time. A merger between itself and discount retailer Kmart mired its image with confusion for a while, but now the retailer is again trying to firmly plant a "hip" image to the home furnishings shopper. The furniture and decor offering at Sears at this point had dwindled to just a disconnected collection of offerings -- and it was not marketed in the right way. Ever looked in a recent Sears catalog? Ouch.

Discount retailer Target, on the other hand, had been re-building itself with very hip and chic designs. It is offering complete home furnishing solutions instead of tired, individual products. Target also brought in big names like Michael Graves, Philippe Starck, Isaac Mizrahi and Thomas O'Brien. Even designer Chris Madden lent her name to J.C. Penney's home collections of bedsheets, pillow cases and bedroom furnishings. In addition, Kmart continued to do endorsement business with Martha Stewart insofar as bedding and garden furniture.

What can Sears do to counteract this and actually grow its home furnishings business? If Lowe's (NYSE:LOW) and Home Depot, Inc. (NYSE:HD) stock downgrades are any indication, the slowdown in homebuying will continue further and may pinch the ability of Sears to re-invent that part of its business at this time. But there's always 2008 I guess.