(Corrects first paragraph to make clear Sears will not raise
cash through the spinoff. Corrects headline to remove reference
to Lampert seeking cash)
By Maria Ajit Thomas
Dec 6 Eddie Lampert-controlled Sears Holdings
Corp, struggling with mounting operating losses and
declining sales, said it would spin off its Lands' End clothing
business, adding to the assets the company is shedding to
bolster its balance sheet.
The company, operator of Sears department stores and the
Kmart discount chain, has been selling or spinning off assets
and closing stores for the past few years to try to turn around
its business. Sales have been dropping since Lampert combined
Sears and Kmart in an $11 billion deal in 2005.
The billionaire hedge fund manager, who took over as chief
executive in February, has been criticized for not investing
enough in the business, which has earned a reputation for dowdy
merchandise and poor service compared to Wal-Mart Stores Inc
and Target Corp.
"Sears is in a steady state of decline," said Brian Sozzi,
chief executive of Belus Capital Advisors. "They're essentially
selling their body parts so they stay alive today."
Apart from losing market share to Wal-Mart and Target, Sears
is facing increased competition from online retailers.
Sears, whose shares were up 3 percent at $51.29 in early
trading, spun off its Orchard Supply Hardware Stores unit in
2011 and its Sears Hometown and Outlet business last year.
In October, the company sold some Canadian real estate
assets for $383 million and said it was considering separating
Lands' End and its auto center business to raise cash.
Sears had cash and cash equivalents of $599 million as of
Nov. 2, down from $671 million on Aug. 3.
Lands' End sells casual clothing, accessories, footwear, and
home products online, through catalogs and in stores.
Competitors include Eddie Bauer LLC and L.L. Bean Inc as
well as department stores such as J.C. Penney Co Inc.
Lands' End, which was bought by Sears in 2002, generated
sales of $1.59 billion in 2012, down from $1.73 billion in 2011.
Sears' sales fell to $39.85 billion from $41.57 billion.
The spinoff will be through a pro rata distribution of
Lands' End shares to Sears shareholders, Sears said in a
regulatory filing on Friday.
Lampert's hedge fund, ESL Investments, currently owns about
48.4 percent of Sears and will own the same stake in Lands' End
following the spinoff.
ESL said this week it had cut its stake in Sears from 55.4
percent by distributing about 7.4 million shares to fund
Sozzi said the company's troubles would not end with the
spinoff of Lands' End, which he described as "a brand going down
"I see better things from Wal-Mart and Target. They're
getting all the traffic. Sears and Kmart have not done enough to
stay competitive," he said.
Lands' End, founded in Chicago 50 years ago as a catalog
business, has lost some of its cachet since the brand started to
be sold at Sears stores.
Land's End said in a separate statement that it expected to
report net income of between $12.7 million and $14.2 million for
the third quarter ended Nov. 1, up from $8.8 million a year
earlier. Net merchandise sales are expected to rise to between
$375 million and $385 million, from about $371 million.
Lands' End plans to list on the Nasdaq under the symbol
Sears shares have risen nearly 21 percent this year, closing
at $49.98 on the Nasdaq on Thursday, giving the company a market
value of about $5.3 billion.
(Additional reporting by Aditi Shrivastava in Bangalore;
Editing by Ted Kerr)