Sears Will Wash Its Hands of Lands’ End on April 4

Source: Thinkstock

It’s only a matter of weeks until Lands’ End is officially on its own. Sears Holding (NASDAQ:SHLD) amended its filing with the Securities and Exchange Commission last week, revealing that it will spin off the outdoor clothing retailer on April 4. Sears initially admitted its consideration of the separation strategy back in October, and then officially announced the deal in December. Five months after it initially floated the idea, the Chicago, Illinois-based company Sears unveiled its timeline on March 14, confirming that Lands’ End will soon turn into a publicly traded company. Lands’ End will trade on the NASDAQ under the symbol LE, beginning on April 7, and the transaction will hopefully help Sears raise cash and curb its revenue slide while allowing shareholders to benefit from the units’ separate significant values.

According to Fierce Retail, Lands’ End was first launched in 1963 as a sailboat hardware and equipment catalog, before becoming a clothing company in 1977. Sears has owned the brand since 2002 and most of its 253 retail outlets are located inside Sears stores. Now, starting April 4, Lands’ End will enter into a lease agreement with the company and initially pay Sears around $27 million in total annual rent for those locations. Later, according to the SEC filing, the lease obligation will drop to $10.9 million for 102 Sears locations by 2019.

Sears’s decision to spin off Lands’ End comes from its need to raise cash amid struggling sales. According to the company’s most recent earnings, it suffered a loss of $358 million in the fourth-quarter compared with $489 million last year, and total sales fell 13.6 percent to $10.59 billion, while U.S. same-store sales slid by 7.8 percent. Now, Sears is doing anything it can to offset the losses and inspire confidence in shareholders. The company has sold assets and spun off a number of businesses – including the company’s Sears Hometown and Outlet as well as Orchard Supply Hardware stores — to stem the bleeding, and this is Sears’s latest attempt to allow CEO Edward Lampert to concentrate on the Sears department store chains and Kmart, both competing for management time and capital within the holding company.

In the past, Lands’ End was believed by some to be the most profitable piece of the Sears Holding company, but the company has suffered a worsening reputation ever since Sears purchased it in 2002. Sales have declined in recent years, and revenue fell to $1.59 billion in 2012 from $1.73 billion in 2011. In regards to Lands’ End, Credit Suisse analyst Gary Balter wrote in a note to clients acquired by Reuters back in December that Sears has “been slowly destroying it,” and thus, the separation is expected to give both Lands’ End and Sears additional operating flexibility. Lampert will be able to concentrate on K-Mart and and Sears department store chain, while new Lands’ End executives can focus on reviving the company’s brand prestige that it enjoyed in the past.

According to Forbes, on April 4, Sears will make a pro rata distribution of 100 percent of its interest in Land’s End to its shareholders of record of March 24. Those shareholders will receive 0.300795 of Lands’ End for each share of Sears held. Issued trading is expected to begin on or around the record date (March 24), while regular-way trading will start on April 7. Sears shares sat up 1.06 at $45.56 as of 10 a.m. Tuesday. Though neither analysts nor investors believe that Sears’s problems will be solved by the new spinoff, they do maintain hope that the separation will give the two companies a greater chance of realizing more success separately.