Sears May Split Lands' End, Auto Center Business; Reports Sales Drop

Sears Holdings Corp. (NASDAQ: SHLD) said this morning (October 29) that it is considering separating its Lands' End and Sears Auto Center units to raise cash amid dwindling revenue. The massive global retailer also reported a third quarter drop in comparable store sales of 3.7 percent, which includes a sales drop of 4.8 percent for Sears domestic stores and 2.6 percent decline for Kmart stores

"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 company said in a statement.

Lands' End is an "iconic brand with the potential to become a more global brand," according to Sears, and executives do not want to sell the retail chain. Instead, the separation would involve "a transaction that would allow existing shareholders the opportunity to benefit from the significant potential for value creation over the long term."

Meanwhile, Sears Auto Centers has a "unique national footprint that can be leveraged to create significant value," according to the statement. "We have begun the repositioning of the business around non-tire related services as tire margins have been compressed industry-wide over the past several years, leveraging the store footprint, the number of service bays and our auto technicians," the company stated.

Sears Holding Corp. continues to struggle financially, projecting third quarter adjusted EBITDA to be between negative $250 million to $300 million versus the prior year's quarter adjusted EBITDA of negative $156 million. The drop reflects the challenging overall economic and highly competitive environment, along with higher Shop Your Way Rewards expenses, according to Sears.

To shore up finances, Sears Canada is selling five store leases to Cadillac Fairview Corporation Limited for $400 million Canadian. The company is also reviewing each U.S. Sears and Kmart store, and deciding whether or not to renew leases that are due. "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," Edward S. Lampert, Sears Holdings' chairman and CEO, said in the statement.

For more, see:
This Bloomberg article
This Sears statement

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