Sears Chairman Eddie Lampert’s latest spinoff just went right into the ditch.
Shares of Lands’ End tanked on Monday, the clothing catalog’s first day of trading as a stand-alone company, valuing the brand at about half the $1.9 billion Sears had paid to acquire it in 2002.
Lands’ End shares, trading under the ticker symbol “LE,” closed at $29.55, down 6.6 percent, leaving the company with a market capitalization of $888 million.
Shares of Sears Holdings, whose losses are expected to widen further without the benefit of operating profits from Lands’ End, lost 6.4 percent to close at $38.10.
It probably didn’t help that Lampert, who has been spinning off Sears’ most profitable businesses even as losses at its Sears and Kmart stores widen, saddled Lands’ End with debt in the spinoff deal in order to extract a $500 million dividend for Sears.
Indeed, investors have seen this movie before. In June, Orchard Supply filed for Chapter 11 less than two years after it was spun off by Sears, partly blaming a hefty dividend that Sears had extracted from its balance sheet.
Sears Hometown & Outlet Stores, spun off from Sears last year, have sunk to hit 52-week lows recently amid lackluster sales and profits. Ahead of the spinoff, Lampert pulled a $100 million cash dividend from the Hometown stores.
In a March 25 regulatory filing, Lands’ End said the interests of Lampert and his hedge fund ESL, which controls Sears and is keeping a 48.4 percent Lands’ End stake, “may from time to time diverge from the interests of our other stockholders.”