Eddie Lampert is looking to divest again — and this time it’s the oxfords and the khakis.
The cagey hedge-fund tycoon is exploring a spinoff of Sears’ Lands’ End brand along with the company’s auto centers, even as the retailer warned it continues to hemorrhage cash on plunging sales.
The mostly mail-order clothing label has been one of the few profitable businesses at Sears of late, despite the fact that Lampert — who took control of Sears by merging it with Kmart in 2005 — “never wanted Lands’ End from Day 1,” according to an insider.
Lampert for years has entertained offers for Lands’ End, pitching it as an international growth story in which Sears would be the exclusive US distributor, according to banking sources.
“It was a deal that would look like Macy’s and Tommy Hilfiger,” according to one insider, noting that Macy’s owns exclusive rights to US distribution of the global Hilfiger label.
Nevertheless, the 51-year- old investor always insisted on a price tag that prospective buyers couldn’t stomach, sources said.
Sears hinted in a statement Tuesday it may spin off Lands’ End as a separate, publicly traded company, calling it “an iconic brand with the potential to become a more global brand.”
But after years inside Sears locations, which have become increasingly dingy and dilapidated under Lampert’s tight-fisted management, the value of Lands’ End has taken a hit since Sears bought it in 2002 for nearly $2 billion.
“You’re always wondering in a transaction with Eddie, how’s it going to work out for you and how’s it going to work out for him,” said Morningstar analyst Paul Swinand.
In April, the Orchard Supply home-improvement chain filed for bankruptcy less than 18 months after Lampert spun it off from Sears at a price north of $23 a share.
Orchard Supply, acquired last month by Lowe’s, in court papers cited massive cash dividends that Sears had culled from its balance sheet after the spinoff as a cause of the filing.”
Sears’ Hometown and Outlet stores, which were spun off a year ago, saw their shares hit a 52-week low of $28 on Tuesday after disappointing quarterly results last month.
Credit Suisse analyst Gary Balter noted that Sears has been silent about a sale of its warranty business that was mentioned earlier this year — possibly a reflection of tumbling appliance sales.
Balter likewise questioned in a Tuesday research note whether the Sears Auto Centers would be attractive for investors.
“There are likely significant environment issues and reparations that may be required in selling off properties that were used to change oils and other car fluids,” the analyst said.
Lampert has steadily shucked assets at Sears, including dozens of the retailer’s most profitable stores and its most popular brands.
While the moves have generated short-term gains, they have sapped the company’s ability to generate earnings.
Sears warned Tuesday it expects to report a third-quarter net loss of as much as $582 million in what Balter called “an amazing rapid deceleration into the abyss for the US retail operations.”