Sears to Evaluate Closing Stores, May Spin Off Lands' End and Auto Centers
HOFFMAN ESTATES, Ill.-In what appears to be a wide-ranging examination of the company's operations, Sears Holdings said it will begin evaluating the possible closing of unprofitable stores and the possible spinoff of Lands' End and Sears Auto Centers.
The parent of Sears and Kmart also announced that it anticipates the net loss for its fiscal third quarter, which will end on Nov. 2, to total between $532 million and $582 million. The net loss for last year's third quarter was $498 million. Same-store sales for the quarter through Oct. 26 were down 3.7 percent, including a 4.8 percent drop for Sears domestic stores and a 2.6 percent decrease for Kmart. The company attributed the loss to the challenging economy and increased expenses for its Shop Your Way rewards program.
Regarding the stores, Sears Holdings said in a statement that it would evaluate each store "in the context of our integrated retail strategy." It will review each location, including stores whose leases are set to expire, and decide whether or not to renew each lease. "We expect to improve our financial performance by removing unprofitable locations and redeploying the capital tied up in those locations, while sharpening our focus around existing Sears and Kmart stores that have higher levels of profitability," the statement said.
Talking about the possible Lands' End and Sears Auto Center spinoffs, the statement said, "We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent and allocate capital in a more focused manner while bringing our business-unit structure to life outside of the Sears Holdings portfolio." The statement added that the Lands' End spinoff would not be structured as a sale of the business, but as a transaction that would allow existing shareholders the chance to realize value from the business over the long term. For Sears Auto Center, the company is "evaluating strategic alternatives for the business to maximize its value for our shareholders."
The statement also commented on Sears Canada's decision to sell five of its store leases to Cadillac Fairview Corp. for C$400 million (about $383 million). Edward Lampert, Sears Holdings' chairman and CEO, said, "We believe that Sears Canada is well positioned to create value for its shareholders through a combination of operating performance improvements, business portfolio actions and leveraging its real-estate footprint working with its mall and other partners."