Broadline retailer Sears Holdings Corporation (SHLD), which continues to face a cash crunch, heaved a sigh of relief by closing the sale of its 11 full line stores to General Growth Properties. The sale resulted in $270 million cash flowing toward the company.
The 11 Sears stores located in Florida, Hawaii, Illinois, Iowa, Minnesota, Oklahoma, Texas, Utah and Washington were sold as part of the company’s announcement in December 2011. The company announced to pull down shutters on 100 to 120 Kmart and Sears full-line stores to trim down costs and produce cash. Further, the company expects to produce $140 to $170 million of cash from store closures through inventory clearance.
Sears also indicated in the release that the stores under sale will continue to operate under the Sears name through 2013 and 2014 as the company is yet to determine the final closing date. The announcement for the completion of the transaction is expected to come later this year.
Sears has long been grappling with weak top-line performances and even weaker bottom-line results. What’s more frustrating for the company is the deteriorating margins, followed by the rising inventory and debt levels.
Sears registered a loss of $4.52 per share in fiscal 2011 compared with earnings of $1.97 in fiscal 2010, primarily due to lower revenue and decreased margins. Revenue during the fiscal year decreased $1,097 million to $41,567 million compared with $42,664 million in the previous fiscal. The decline in revenue not only reflects lower comparable store sales at the company’s each and every segment but also reduced Kmart and Sears full-line stores in operation during the fiscal year.
Last month, The Wall Street Journal reported that Sears is likely to sell its Lands’ End brand in an urge to enhance liquidity while improving operating performance. The Journal stated that Sears Holdings, who is already in talks with various private-equity firms, is looking to raise about $2 billion in cash from this sale. Further, the company is looking to structure a sale-and-license-back deal, through which Sears will hold the license to sale Lands’ End products.
In a separate story, Sears Holding has announced its intention to split its Sears Hometown and Outlet businesses. The move will help the company in concentrating on core business activities while raising funds in the range of $400 million to $500 million. The separation will be done through a proposed rights offering and the proceeds will be used for general corporate purposes.
The crux of the matter is Sears is trying hard to optimize its financial performance through a string of measures for enhancing its growth prospects. The company’s focus is now on improving its structure by dipping investment in sections of the company that no longer contributes significantly to its growth.
Apart from this, the company will focus on cost containment, inventory management, and merchandise initiatives to improve margins through leverage on buying and occupancy expenses.
Sears Holdings, which competes with Wal-Mart Stores Inc. (WMT) and Target Corporation (TGT), currently retains a long-term Underperform recommendation. Besides, the company has a Zacks #3 Rank, implying a short-term Hold rating.
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