
Sears, circa 1960
Sears seemingly can’t sell merchandise so the company is forced to sell stores (aka real estate).
Sears Holdings Corp. said it plans to spin-off its small-format hometown dealer stores and outlets and sell 11 stores to raise cash and shore up its money-losing retail business.
The long-suffering retailer, controlled by hedge-fund investor Edward Lampert, said it expects the steps to raise up to $770 million. The offering to separate the more than 1,000 hometown and outlet stores should raise $400 million to $500 million, the company said.
This is desperate move as suppliers are unwilling or reticent to accept orders from SHC for fall 2012 deliveries. Sears shares had plummeted below $30 in January when word spread that CIT Group Inc., a key lender in the retail industry, would no longer provide loans to suppliers shipping goods to Sears and Kmart. CIT’s decision came on the heels of Sears’ disappointing holiday sales drop, a string of quarterly losses, rising debt, dwindling cash, store closings and downgrades from the major credit agencies deeper into junk territory.
Interestingly investors and retail observers have long anticipated that Lampert would sell off portions of Sears, in particular its real estate, to raise money. It’s a tactic Lampert used when he purchased Kmart out of bankruptcy in 2003.
Sears Holding Company presents two important lessons for all retailers:
A non-merchant at the helm is trouble - CEO Lou D’Ambrosio, in the top slot a year now, previously worked at Avaya and IBM. Whether it’s a coincidence or not, other struggling retailers are headed by non-merchants as well.
Guard your brand integrity at all costs - Sears has been blase’ about core brands such as Kenmore and Craftsman which, if given proper nurturing, could drive the entire Sears brand.
Experts predict Sears will eventually become an e-commerce retailer with fewer, smaller storefronts. If true, than can’t happen fast enough to stop the hemorrhaging of cash out of the business.