Sears to Spin Off Lands’ End

In Reports, What's New, Industry News by Jeff Prine

Land's EndHoffman Estates, IL—While Sears Holdings would have probably preferred to sell its Lands’ End business outright, the retailer said Friday that it will be spin off the division as a separate company.

In an SEC regulatory filing, Sears said the spinoff will be through a pro rata distribution of Lands’ End shares to Sears shareholders, Sears said.

“It plans spin-off as a separate company by distributing stock to the retailer’s shareholders.” The filing came as not surprise since Sears Holdings Corp admitted in October it was considering ways to separate Sears Auto Center and Lands’ End businesses from rest of the company. (However, there was no mention of Sears Auto Center in Friday’s announcement).

‘Mitigate Competition for Capital’

Sears bought Lands’End in 2002 for $1.9 billion. The spin off is subject to approval by the company’s board of directions and could be dropped or changed by the company.

“The spinoff…is expected to result in a more efficient allocation of capital for both Sears Holdings and Lands’ End and mitigate the competition for capital that currently exists between Lands’ End and other Sears Holdings business units,” Lands’ End said in a filing.

Sears and Kmart have struggled in recent quarters and has been looking for ways to improve business. Last year, Sears announced plans to restore profitability by cutting costs, reducing inventory, selling off some assets and spinning off others. Those moves helped it reduce net debt by $400 million and generated $1.8 billion in cash from the asset sales in the latest fiscal year.

Nonetheless, losses continue to mount. In November Sears Holdings reported a wider third quarter loss as revenue declined 7% to $8.27 as the company marked down goods heavily to move merchandise.

ESL Investments, the hedge fund run by Sears Chairman/CEO Edward Lampert currently owns about 48.4% of Sears Holdings and will own the same stake in Lands’ End following the spinoff. Yet ESL reported last week it had cut its stake in Sears from 55.4% by distributing about 7.4 million shares to fund investors.


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