Sears May Spin Lands’ End Off

Oct 29, 2013 7:20 AM  By

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Sears Holdings Corp. is considering separating Lands’ End and Sears Auto Center from the rest of the company.

Sears Holdings Corp. said Oct. 29 that it is considering separating Lands’ End and Sears Auto Center from the rest of the company.

The company said in a press release that separating Lands’ End and Sears Auto Center 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 the business unit structure to life outside of the Sears Holdings portfolio, according to a press release.

Sears Holdings said it believes that “Lands’ End is an iconic brand with the potential to become a more global brand, and we presently anticipate that any separation, if pursued, would not be structured as a sale but rather through a transaction that would allow existing shareholders the opportunity to benefit from the significant potential for value creation over the long term.”

Stuart Rose, Managing Director at investment banking firm Tully & Holland, said that when Sears Holdings bought Lands’ End in 2002, it was the premiere brand and direct marketer. However, Sears Holdings did not fully capitalize on its $2 billion cash acquisition.

Rose said there are two reasons Sears Holdings why a spinoff would make more sense than a sale. One it is more tax efficient, because spinoffs are generally tax free. Also, it gives the shareholders real value.

“A cash sale would just feed Sears more cash to flush down the drain,” Rose said. “This way the shareholders have some value in their pocket.”

Last month, Lands’ End announced it was working with Borderfree to provide an easier and more efficient online shopping experience for its international customers.

Sears Holdings also announced that as a part of its integrated retail strategy, it will consider additional Kmart and Sears store closures.

“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 company said.