Sears Considers Separation From Lands' End, Sears Auto Center

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

Company believes separation could improve operations of all businesses involved

In response to an increasingly competitive environment and financial difficulties, Sears announced it is considering separating from Lands’ End and Sears Auto Center. This move would enable the company to better focus on its Sears and Kmart stores and could potentially reassure creditors and vendors. The company reassures that a separation from Lands’ End would not be structured as a sale so that existing shareholders could benefit from any future increases in value. Similarly, Sears is considering strategic alternatives for Sears Auto Center, which has been working to shift business towards non-tire related services.

For the past several years, Sears has been working to eliminate some of its assets in a move deemed “cutting the fat” by Morningstar analyst, Paul Swinand. However, in the face of a “challenging economic and highly competitive environment,” Swinand claims, “They now are cutting in the muscle.”

Sears acquired Lands’ End in 2002 in order to revise its brand image and reveal Sears’ “softer side.” Introducing the high-end Lands’ End brand also enhanced the company’s offerings to Sears’ hardline customers who might not have begun to explore store offerings outside of appliances. In 2012, hedge fund Edward Lempert began hinting that a separation could occur in the future. Now that a separation is on the table, the company believes these changes would enable each business to focus more closely on individual growth. Sears said in a statement: “We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent, and allocate capital in a more focused manner while bringing our business unit structure to life outside of the Sear’s building portfolio.”

The company also plans to trim store numbers in Canada, where it announced it is selling five store leases to the Cadillac Fairview Corporation for $383 million. In the US, it will be evaluating stores in the states and deciding which leases to renew. By minimizing the number of underperforming Sears and Kmart stores, the company hopes it can begin turning these savings toward stronger stores and long-term growth.