Sears Holdings to spin off Lands' End to raise cash

Sears Holdings Corp, which is struggling with mounting losses and declining sales, will spin off its Lands' End clothing business, adding to the list of assets sold off to raise cash.

In a regulatory filing made public Friday, Sears announced plans to list Lands End on the Nasdaq exchange under the ticker LE.

The shares will be distributed to Sears shareholders. The news boosted Sears shares, which are currently trading at $51, up two per cent since yesterday.

Sears 'may have to continue dismembering itself to stay alive today and shrink from inside out'- analyst Brian Sozzi

Sears had attempted to sell Lands' End to private-equity firms last year, but Fridays announcement makes it clear that attempt was a failure.

"It makes you question the value of what Sears is sitting on," Belus Capital Advisors analyst Brian Sozzi said. "It may have to continue dismembering itself to stay alive today and shrink from inside out. "

Eddie Lampert, the billionaire hedge fund manager who is now running Sears, has already sold off Hometown and Sears Outlet stores and Orchard Supply Hardware Stores. Heannounced this fall that the retailer would also sell off Sears Auto Centre.

Sears said Friday is currently seeking alternatives to selling the Auto Centre business.

Sears Canada selloffs

Lampert's hedge fund, ESL Investments, currently owns about 48.4 per cent of Sears and will own the same stake in Lands' End following the spinoff.

Sears Canada has announced plans to close five stores, including its flagship Eaton Centre store, will consolidate its Repair Centres, forcing its staff to become independent operators and sold its stake in its real estate holdings.

It also paid a $5 a share dividend on its stock, passing $450 million in cash to its U.S. parent, money-losing Sears Holdings.

Sears bought Lands' End in 2002 for $1.86 billion US, hoping the classic American brand, which began life as a sailing and hardware company, would draw customers into stores and bolster its online presence.

But Lands' End's reputation for quality and customer service suffered under its new owners and it was always an awkward fit.

Lands' End works on the web

Historically, catalogues were the primary source of Lands' End's sales and it expanded into internet sales quite naturally. Online sales marked about 80 per cent of its U.S. consumer revenue last year.

Lands End generated sales of $1.59 billion in 2012, down from $1.73 billion in 2011.

Sears, which bought Kmart in 2005, has been left behind by the move to discount retail, with more effective competitors such as Wal-Mart and Target. Meanwhile, savvier retailers have claimed the upmarket, more affluent shoppers.

In November it reported a third quarter loss of $286 million as revenue declined seven per cent to $8.3 billion. The company offered deep discounts to move merchandise, but same store sales slid by 3.1 per cent.