Sears might spin off apparel brand Lands’ End

October 29, 2013 03:43 PM

Sears Holdings Corp., parent company of Sears, Kmart and Lands’ End retailers and brands including Craftsmen and DieHard, may divest itself from both Lands’ End and its Sears Auto Center businesses, the company said today. That would free up cash for Sears and allow it to focus on its other retail businesses, it says.

Sears, No. 6 in the 2013 Top 500 Guide, has owned Lands’ End since 2002.

“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 Sears Holdings portfolio,” the company says. “Regarding Lands’ End, we believe that Lands’ End is an iconic brand with the potential to become a more global brand.”

Sears, which does not break out revenue results for Lands’ End,  is working to become nimbler, with fewer assets to manage, a spokesman for the company says. “As we move through this process, we are continuously evaluating our asset structure and whether specific assets and/or businesses are better managed within the current Sears Holdings asset configuration or outside it,” he says.

A Lands’ End spokeswoman declines to speculate on a Sears’ transaction. “It’s business as usual for us at Lands’ End,” she says. “We remain focused on our customers as we go into the holiday season.”

As a standalone company, Lands’ End will be able to regain brand value it had lost while operating as a unit of Sears, says Paula Rosenblum, managing partner at Retail Systems Research. “[Lands’ End] will be free to make deals with other retailers,” allowing Lands’ End products to be sold across more retail outlets, she says.

Sears also says that it plans to re-evaluate its existing Sears and Kmart store locations and close those which aren’t profitable, starting today with the sale of five Sears Canada store leases. The company’s combined comparable-store sales decreased 3.7% for the 12-week period ended Oct. 26, with sales down 4.8% for domestic Sear stores and down 2.6% for Kmart stores, it reports.

“I’ve felt for the past decade or so that Sears, in particular, was a pile of real estate looking for things to fill up the stores, rather than a concept finding space that’s appropriate for it,” Rosenblum says. She also questions whether the retail chain Kmart—which Sears’ now-CEO and chairman Edward Lampert bought out of bankruptcy in 2003, before merging it with Sears in 2005—“deserves” to exist. Lampert, she says, lacks much retail experience. He continues to run the hedge fund he founded in 1988, ESL Investments Inc., along with Sears. “You need retail experience to run a retail enterprise—especially one desperately in need of reinvention,” Rosenblum says. “But again, at this point, I don’t know what the heck you’d do with [Sears and Kmart stores], whoever you were.”





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