Sears to spin off Lands’ End brand to shareholders

Bloomberg NewsDecember 6, 2013 

— Sears plans to spin off its Lands’ End unit, giving investors a piece of a profitable clothing brand amid almost nine years of market-lagging returns for the department-store chain’s shares.

The distribution is subject to the approval of the board and other conditions, Hoffman Estates, Ill.-based Sears said Friday in a statement. The unit’s registration filed with the Securities and Exchange Commission Friday didn’t say how many Lands’ End shares Sears investors would receive.

Edward Lampert, Sears’ chairman, chief executive officer and largest shareholder, is breaking off for investors a unit that has remained profitable while the department-store chain started losing money. Sears shares slid about 57 percent since March, 28, 2005, when Lampert merged Kmart Holding Corp. and Sears, Roebuck & Co., while the Standard & Poor’s 500 Index rose 52 percent.

“It’s a good thing for shareholders,” Robert Passikoff, president of consultant Brand Keys in New York, said in a phone interview. “Lands’ End, the brand itself, was weakened by its association with Sears. Folks see Sears as being more downscale, cheaper. Lands’ End could regain some of its brand shine by being off on its own.”

Sears fell 3.8 percent to $48.09 at the close in New York Friday after rising as much as 4 percent earlier in the day.

Lands’ End, founded in 1963 and acquired by Sears in June 2002 for about $1.9 billion, said in its registration statement that it had net income of $49.8 million on revenue of $1.6 billion in its fiscal 2012.

While that performance is better than Sears’ $930 million loss last year, Lands’ End’s net income has dropped 63 percent since 2008 as revenue slid 4.2 percent.

Sears had been hoping to develop a more upscale customer base with the acquisition of Lands’ End, said Steven Dennis, who worked at Sears from 1991 to 2003 and spearheaded the Lands’ End acquisition and integration in 2002 and 2003. Lampert didn’t continue that strategy, he said.

“In the short term, having that Sears store volume will be important to Lands’ End,” said Dennis, who now runs Dallas-based SageBerry Consulting, which he founded. “In the long term, if I were running Lands’ End, I would look for alternative retail partners that are stronger and that would be a better fit for my brand, whether that is someone like Macy’s or opening your own stores.”

Edgar O. Huber, who has been CEO of Lands’ End since August 2011, is expected to continue in that role, according to Friday’s filing.

Lampert has been selling and spinning off Sears assets as 27 straight quarterly sales declines sap Sears’ cash pile. Sears said in October that it was considering separating Lands’ End and its auto center unit. Lampert spun off Sears Hometown & Outlet Stores last year in a move that raised $346.5 million from a rights offering, and a $100 million cash dividend paid by Hometown.

Sears said Friday that it expects the Lands’ End spinoff to be a tax-free distribution to shareholders and didn’t mention a dividend for Sears.

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