Sears streamlining REIT and Shop Your Way loyalty to generate value

Sears (NYSE:SHLD) raised billions of dollars last year in cash by spinning off assets, selling stores for investment and leasing out space in prime locations. And CEO Eddie Lampert announced at the annual shareholders meeting that these moves should be enough to shake off liquidity concerns for several years.

Lampert also discussed one of the company's most valuable assets, the Shop Your Way loyalty program, saying that it will increase the importance of each Sears customer, reported Reuters.

He hopes that the $2.5 billion in cash gained from the proposed real estate trust will quiet "skeptics and cynics" for awhile. The REIT would allow for new tenants on a portion of the allotted space, allowing Sears to operate on a smaller footprint and for more profit.

Shop Your Way accounted for 74 percent of overall sales in 2014, and Lampert boasted that other retail loyalty programs do not personalize and communicate with customers as effectively.

However, in a blog post that was written just prior to the meeting, Lampert said that one of his regrets was failing to generate enough money to fund the transformation quickly enough.

The lack of funding not only stems from operational performance, but pension expenses and the effects of the recession as well. In 2014, Sears generated $2.4 billion of liquidity funds from financing activities, which included the Lands' End spinoff, short-term loans by real estate, a rights offering for 40 million common shares in Sears Canada, and a rights offering for senior unsecured notes with warrants.

The company has completed a broad range of real estate transactions to generate cash.

Lampert said the funds from those transactions have given Sears a better footing, "allowing us to fund our company's transformation much faster."

Sears will continue to drive value in 2015. In the past six months, the company announced the formation of Seritage Growth Properties, an REIT that will produce $2.5 billion in cash. And in April, the company formed joint ventures with Macerich, Simon Properties and General Growth Properties, resulting in more than $400 million in cash.

"Sears and Kmart have already moved beyond the old and sorely outdated traditional store network models," Lampert wrote on his blog. "Every day, we are building richer, deeper relationships with our members through Shop Your Way, buy online pickup in store, in-vehicle pickups and returns, digital kiosks and more."

In February Sears reported its 11th straight quarter of loss, with comparable sales falling 7 percent at Sears and 2 percent at Kmart.

For more:
-See this Reuters article
-See this Sears blog

Related stories:
Sears Canada picks up two former Target brands
Sears names two Primark sites in Massachusetts
Sears CFO rebuts negative implications of faster vendor payments
Sears' Lampert optimistic, moving forward with REIT
Sears considering REIT to raise more cash