New York—Sears Holdings Corp. found itself removed from yet another list: the Standard & Poor’s 500-stock index which the retailer has been a part of for more than 50 years.
In fact, Sears Holdings Corp., a founding member of the Standard & Poor’s 500-stock index, got the boot this week from the getting venerable benchmark–and its own stock is to blame.
Once America’s most iconic retailer, Sears will lose its place in the market measure because its “public float,” or the number of shares that are in the hands of public investors, has fallen below a key threshold, according to a release issued by S&P Dow Jones Indices on Wednesday.
But the S&P on Thursday added that news of a planned rights issue was the tipping point for knocking the retailer out of the benchmark. On Tuesday, Sears’s board approved a plan that grants shareholders the right to swap stock in Hometown-brand hardware stores it plans to spin off.
Getting booted from the index means mutual funds and ETFs that track the S&P 500–which together account for roughly $1.5 trillion in assets–will have to sell Sears shares, because the company is no longer an index component. The decision was bad news for Sears stock, which tumbled $4.55, or 7.9% to $52.90 Thursday.
Sears’s public float has been below the stipulated 50% threshold since October 2008, in fact. Billionaire hedge-fund investor Edward Lampert and his hedge fund ESL Investments hold 62% of Sears Holdings shares, a position that was first accumulated in Kmart Holding prior to a blockbuster merger agreement between the two companies announced in 2004, according to regulatory filings.
‘Solely a Function of the Public Float of Our Shares’
“While we’re disappointed in Standard & Poor’s decision, we would point out that the action is rules-based and solely a function of the public float of our shares, and not the valuation or performance of the company,” a Sears spokeswoman said.
The exit from the S&P 500 is the latest blow for one the most recognizable U.S. retailers, which has been struggling for years to increase traffic through efforts like sprucing up stores and establishing a loyalty program to reward its best customers. Earlier this month, Sears said in an earnings call cost cutting measures helped it to narrow losses for its second quarter but sales still declined more than expected.
Sears was once part of an exaulted group of retailers on the S&P 500 that once included Gimbels, Montgomery Ward and Woolworth. JCPenney is now the only retailer that was an original member.
Sears has been one of the best performers on the index in 2012. Through Wednesday, Sears’s stock has climbed 81%, better than all but five of the index’s members. Its performance has been shaky in recent years, though, losing more than 50% in 2011 after losing 12% in 2010.
“While we’re disappointed in Standard & Poor’s decision, we would point out that the action is rules-based and solely a function of the public float of our shares, and not the valuation or performance of the company,” a Sears spokeswoman said.
The exit from the S&P 500 is the latest blow for one the most recognizable U.S. retailers, which has been struggling for years to draw traffic through efforts like sprucing up stores and establishing a loyalty program to reward its best customers. During an earnings call earlier this month, Sears said cost-cutting measures helped narrow losses for the fiscal second quarter, but sales still declined more than expected.
Sears is the latest among a string of once-vaunted retailers to lose its place on the S&P 500. Montgomery Ward was dropped in 1968, Gimbel Brothers in 1973 and Woolworth in 1998. Just one retailer that was a member of the original S&P 500, J.C. Penney Co., will remain after the Sears exit.
