Sears’ Lampert Spins Off Lands’ End, Not Analyst Doubt
Last week, Sears Holdings Corp. (NASDAQ:SHLD) announced that it had plans to spin off its Lands’ End unit, giving investors a piece of a profitable clothing brand. Sears shares gained following the announcement, but now analysts are warning investors that the distribution may be good for shareholders, but it doesn’t bode well for creditors and Sears’ future financial outlook. Belus Capital Advisors analyst told Reuters Friday, “Sears is in a steady state of decline. They’re essentially selling their body parts so they stay alive today.”
Mary Ross Gilbert, an analyst at Imperial Capital LLC, relayed similar sentiments via Bloomberg Monday, and explained, “While this is favorable to shareholders, it’s detrimental to creditors. As they sell off or spin off these profitable businesses, these cash-generating businesses, you’re left with higher losses at Sears.”
Thus, it is hard to weigh the true pros and cons of such a spinoff, because although Lands End has managed to stay profitable and will give investors something to finally be excited about, analysts still beileve that the move could generate less capital than CEO Eddie Lampert anticipates, thus perpetuating the cycle of burning cash amid deflating consumer demand inside rundown stores. Lampert has been known to orchestrate strategy after strategy, abandoning one as he picks up another, and industry sources are continuing to question just how productive these ongoing renovations are.