Sears shares rise on spin-off plan
The company and its offshoot will be closely linked, but what will happen with Lands' End?
Shares of Sears Holdings (SHLD), the retail empire controlled by billionaire Edward Lampert, rose Monday after the company announced plans to spin off some of its stores not connected to its flagship brand into a separate company. Two Sears, though, are not necessarily better than one.
The company's 1,238 Hometown and Outlet franchises, along with some hardware stores, will be part of a new company called Sears Hometown and Outlet Stores, which will trade under the ticker symbol SHOS. As with Sears Holdings, Lampert's ESL Investments Inc. will control the new company. Not surprisingly, the fate of the two Sears companies will be closely linked.
Sears Hometown will license Sears Holding's Kenmore, Craftsman and DieHard brands, whose products accounted for about 60% of 2011 sales, according to a filing with the Securities and Exchange Commission. The new company will depend on its former parent for key services, including accounting, supply-chain management and website hosting. Sears Hometown will also be placed at a competitive disadvantage after the separation.
"Although we plan to leverage our ongoing relationship with Sears Holdings in order to obtain similar benefits in purchasing power, we may be unable to obtain goods, technology and services at prices and on terms as favorable as those available to us prior to the separation, which could increase our costs and reduce our profitability," the SEC filing says.
Sears Holdings has signaled for months that it was willing to sell anything that wasn't nailed down. Earlier this year, the retailer announced plans to spin off part of its Canada business. There were also media reports that Lampert was trying to unload Sears' Lands' End business. The preppy brand has been a poor fit with Sears ever since the retailer bought the company for $1.86 billion in 2002.
The fact that Sears has yet to find a buyer for Lands' End, even at a steep discount to its purchase price, does not bode well for Sears Hometown. Indeed, the new company's financial performance is not great.
During the 2011 fiscal year, sales were $2.34 billion, little changed from $2.35 billion in the year-earlier period. Net income during the same time was $33.1 million, down from $49.8 million in the 2010 time frame. Sales in the first quarter of 2012 rose 3.7% to $479.9 million as the company opened 35 Sears Hometown and 45 Sears Home Appliance stores. Same-store sales, a key metric for retail companies, rose a lackluster 0.1% during the quarter.
Sears Holdings is set to report earnings Wednesday. The company is expected to post a loss of 86 cents in the July quarter on revenue of $9.63 billion. Revenue has declined for 19 straight quarters and is expected to continue falling for the foreseeable future.
Monday's pop in Sears Holdings' shares will be short-lived once investors realize that slicing and dicing the company won't do much to address the company's underlying weaknesses. Any stock with the name "Sears" should be avoided.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
sears has gone down in everything except there prices keep rising i have stopped shopping there if i am gonna pay high prices for cheap chinese goods better to go to walmart and pay cheap prices for chinese goods.
The glory days of SEARS have long gone by and in the words of Bruce Springsteen "they ain't coming back". Eddie Lampert is making restructuring moves for financial reasons only to milk this for all it's worth. This doesn't solve their main problems which are:
1. Lack of identity
2. Declining shopping base (average SEARS shopper is over 50
3. Poor image with other demographics
4. Low morale amongst remaining workers both at the stores and the corporate office
5. Eroding brand base with Kenmore and Craftsman with Big Box own brands such as Lowe's (Kobalt) and Home Depot (Husky) etc. and both carry all the regular name brands.
6. Nothing to entice shoppers to go to SEARS
7. Service and customer relationship issues
8. Lack of leadership especially in merchandising
9. High retail prices compared to competition
10. Many locations in malls which are seeing declining patronage
11. Losing sales to Internets sites
12. Host of other issues....
sears should go wal- mart,literally!!!....go big!!!...expand the foot print,do more,seriously,it usually works, the more you offer the stronger you are...sears is so 1960's...update,EXPAND and grow..they basically offer the same stuff,........electronics,clothes,lawn and garden,shoes...just add groceries,leave the malls alone and watch them come!!!!!
pay me a nominal fee for my consultation!!!!...lol
YOU NEED TO GO ON THOSE TELEVISION MAKEOVER SHOWS. THERE IS A SHOW THAT COMPETES FOR THE BEST NEW MARKETING CAMPAIGN. THE COMPANY EVENTUALLY CHOOSES THE BEST TEAM WHO CAN REPRESENT THEIR VISION. THIS WILL ALSO GIVE YOU PUBLIC EXPOSURE AND A VESTED INTEREST, EMOTIONALLY, BY THE PUBLIC.
DO THE SAME WITH A MAKEOVER FOR THE DECOR OF THE STORES AND WHAT LINES OF CLOTHING AND MERCHANDISE THE PUBLIC WANTS TO SEE. THERE ARE PLENTY OF TELEVISION MAKEOVER SHOWS AND PEOPLE LOVE THEM. PERHAPS SEARS CAN MARKET ITSELF AS 'THE PEOPLE'S STORE' AFTER HAVING HAD THEIR INPUT AND VIEWING THE MAKEOVER SHOWS.
EVEN BETTER, HOW ABOUT AN INTERACTIVE MAKEOVER SHOW THAT ALLOWS THE PUBLIC TO VOTE ON CHOICES DURING THE SHOW???? THE FUTURE IS HERE AND SEARS MUST GET WITH THE TIMES IF IT WISHES TO SURVIVE. YOU COULD ENTITLE THE SHOW,
SAVE SEARS - AMERICA'S ICON
Ingrid - IMO you are actaully showing what is wrong with a lot of peoples thinking. You want to stone Lampert because he's the last guy holding the grenade. I am no fan of his, but let's hold the fair trial first before we stone anybody.
K-Mart was failing when Lampert took it over, and Sears was circling the drain when he used K-Mart to buy Sears. He didn't start out to ruin them, just rode them further down into the abyss. As others have stated, focusing on customer service would have been a good place to start.
How about we stone the Brennan brothers? One ran Sears into a sad state of affairs, while the other drove Monkey Ward into oblivion.
How about we stone your neighbors - they just aren't shopping at Sears anymore. What about JC Penny, Best Buy, Circuit City, Mervins...I could go on. All dead or dying because you and your neighbors changed the way they shopped. That's not Lamperts fault, and it's not Romney's or Obama's fault.
Again, I am not defending Lampert, just suggesting you sort all the facts. It's too easy to demonize one person and ignore contributing factors.
@1flyguy1 - The Craftsman brand name is actually owned by Sears. Sears contracts with tool manufacturers to produce their tools under the Craftsman name. Danaher does make a majority of the hand tools for Sears, notably wrenches and sockets, but they definitely don't own the brand.
- Former Sears tools employee
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Advertising over the social network's mobile offering appears to work for dating apps.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.