Sears shares rise on spin-off plan

The company and its offshoot will be closely linked, but what will happen with Lands' End?

By Jonathan Berr Aug 13, 2012 10:52AM

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.

Tags: SHLD
196Comments
Jan 24, 2014 6:56PM
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I really like seeing what's going on with major companies. Thanks for sharing this because I really did enjoy reading about Sears. I think I might have to come back here and see if there is more news about other big companies!

 http://www.greeleyplumbing.us/Services/

Jan 6, 2014 2:41PM
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Great article! I've been trying to learn about businesses and how they are ran, and this has some great insight on things I never knew! Thank you for sharing!

Jason |  http://www.smokeysgaragedoor.com/phoenix-electric-garage-door-openers.html
Aug 15, 2012 1:35AM
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Sounds like Sears is hammering in the final nail in its own coffin.
Aug 14, 2012 11:40PM
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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.

Aug 14, 2012 11:14PM
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How about actually selling QUALITY PRODUCTS? That may actually work! AND perhaps sending all of their customer service people to training so that they learn how to be respectful towards potential and past customers. I HATE KENMORE and SEARS has alot of bogus policies when it comes to repairing the junk that they make!!! Ever heard of a little repair company called A&E!!!!!!CON ARTISTS!!!!
Aug 14, 2012 6:35PM
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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....

 

 

 

Aug 14, 2012 3:54PM
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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!!!!!

 

p.s

 pay me a nominal fee for my consultation!!!!...lol

Aug 14, 2012 2:12PM
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ATTENTION  SEARS!!!!!!!!

 

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  

Aug 14, 2012 1:47PM
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SEARS....Think Website online sales.  Sears used to be known for catalog sales, go back to your roots!!
Aug 14, 2012 12:11PM
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All their doing is getting rid of their best assets before they file for bankruptcy, Kmart did the same thing with all the companies they once owned i.e. Sports Authority, TJ Maxx, Marshalls, Penske automotive and Walden Books etc... Sears has a lot of leases in dead or dying malls they would love to get rid of. Continental Airlines also did the same thing when they took over Eastern Airlines, they took the best of Eastern and then let them die. Same story the stock holders and employees are the ones that get screwed.
Aug 14, 2012 8:34AM
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Let them them go under. I was a paying customer for 26 years and never missed a payment of their card. I went to the store to buy some sheets and found that my card was cancelled. No warning nothing. How is that for treatment???
Aug 14, 2012 4:46AM
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It is more about the buying trend of the public. Google it, bing it, find it on the internet a little bit cheaper. Save the sales tax by dealing with a distant company that has no operations in your respective state. Now we have Best Buy, Circuit City,  JC Penny and Sears - dead and dying! Even Wall Mart looking at down-scaled stores and emphasis on internet marketing with no local availability. When all our "local" outlets are gone, we'll no longer have any hands on purchasing benefits of product comparison and instruction. My local photo store taught me photography to a semi pro level. Our local economy will not benefit when the big boxes are empty. People forced into those retail jobs because their technical or manufacturing jobs went overseas, well where do they go now? Handwriting is on the wall
Aug 13, 2012 7:29PM
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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.

 

 

Aug 13, 2012 6:22PM
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I use to really love sears! It was a great place to shop because you knew if there was a problem the company would do what ever it took to make it right. When sears stopped this sort of customer care, they gave up what separated them from the rest of the retail big box stores. If they made customer service Job number one, they could rebuild their business, good name, and profits. I just bought a new dishwasher from them and had the guys that do the installation show up with no tools! I asked them how they expected to do the installation and they just looked at me like I was supposed to supply the tools! I ended up charging them $20.00 bucks to rent my tools and they performed the installation! They were wearing Sears uniforms, and driving a Sears truck! How weird is that? The guys were very friendly and I felt sorry them. Still, I paid for the install so I figured it was fair to rent them tools since it coudn't be completed with out them. I figured it was a waste of time to file a complaint.
Aug 13, 2012 5:46PM
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Lets cut to the chase poor mismanagement  has left them on life support so it is time to do one of two things pull the plug or transplant someone with brains to run the company.
Aug 13, 2012 5:17PM
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@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

Aug 13, 2012 5:13PM
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I worked for Sears starting in 1975. Back then it was still all about customer service. By the time I left, in 1984, that was left for dead. The company was dying a slow death. Had no idea how to cope. And then it just croaked. Sears died as company when Kmart bought it. Sears Holdings, what a joke. What was once a proud and upstanding retail source is now a shadow if it's former self. There are two good scenarios here. One would be to just remove the Sears name and brand forever. The other would be someone that actually gives a damn to buy the Brand and restore it to what it once was. I really think the US could stand a touch of that.

Aug 13, 2012 5:11PM
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This is just a lame attempt to post capture back capital lost in a share price that will never go back up.
Aug 13, 2012 5:04PM
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Shame, what was once an American Icon started as Sears Roebuck Co. with the free catalogs that we poured over for the whole year just wishing for things. I think it's sad that instead of supporting them we just tear them down but boy how we LOVE chinese Walmart. Name anything from Walmart that has become a trademark other than Cheap Worthless Chinese exports?Craftsman tools, Kenmore, back in the days of American manufacturing those were brands you could be proud to own. Of course they HAD to go to importing to keep pace wiith all the other department stores. If you want quality you have to pay for it. Unfortunately the bottom line is PROFIT, as long as the public buys it why bother with quality. Ian leuytenhal is correct!
Aug 13, 2012 5:01PM
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sears  should  rename themself   cheap labor store
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