Bringing to fruition what was previously just a strategy under consideration, Sears Holdings Corp. has filed a registration statement with the Securities and Exchange Commission officially announcing its intention to spin off its Lands’ End business, pending approval by the company’s board of directors.
Historically, Lands’ End has been a reliable performer, known for its comfortable, affordable clothing, competing directly with comparable apparel brands like L.L. Bean. It operates on a business model similar to that of L.L. Bean, moving merchandise through multiple channels: catalog sales, internet purchases and over 300 bricks-and-mortar stores across the US. Sears bought the retailer in 2002 for $1.9 billion.
Sears is motivated to sell of Lands’ End not because of its flagging performance, but precisely because it has been revenue rich and therefore will likely fetch a good price. This is an extension of Sears’s controversial strategy to sell off some its best performing stores for the purpose of raising as much capital as possible. Sears is crunched for cash and may be expecting a need for more after what many anticipate will be a disappointing holiday shopping season. The Sears financial performance has been anemic of late, with a second quarter net loss of $194 million, compared to $132 million at the same time last year. Revenues plunged 6.3% to $8.87 billion from $9.47 billion.
Sears has now decided to spin off” Lands’ End to its own shareholders rather than simply cut all ties through a simple sale. Speaking to the Wall Street Journal, a company spokesperson said, “We believe that Lands’ End is an iconic brand with the potential to become a more global brand.”
Still, some see the maneuver as a way to wind Sears down rather than revive it, selling off its best assets while they still retain marquee value. Over the last eighteen months, Sears has sold almost a dozen stores nationwide, some of them admittedly among their best money makers. Some have noted that this an unconventional strategy since retailers typically invest more money into their top performing locations, rather than unload them. Robert Futterman, chief executive of RFK, a realtor which specializes in leases to retailers, said, “Retailers invest in their best stores and refurbish them, they don’t sell them.”
In response to the news, Sears shares have jumped 1.6% to $50.80.