Originally created 03/16/05

Report: Sears seeking buyer for Lands' End



CHICAGO - Sears, Roebuck and Co. may be working on one last big sale before its merger with Kmart: a sale of Lands' End.

According to a report Tuesday by Women's Wear Daily, a respected retail trade publication, Sears has put the casual clothing manufacturer up for sale for $1.2 billion. That's $700 million less than it paid three years ago for the Dodgeville, Wis.-based unit, which sells apparel through catalogs, about 30 retail and outlet locations and Sears department stores.

The report, citing unnamed sources, comes as Sears is in the final stages of being acquired by Kmart Holding Corp. for $11 billion. The merger, announced in November, is expected to close shortly after shareholders of the two companies vote March 24.

Sears spokesman Chris Brathwaite declined comment on the report. "We don't comment on rumors and speculation," he said.

In trading Tuesday, Sears shares rose 45 cents to close at $58.45 on the New York Stock Exchange. They were trading at $45.20 at the time of the Nov. 17 merger announcement. Kmart shares rose $1.93, or 1.5 percent, to finish at $130.68 on the Nasdaq Stock Market - a new 52-week high.

Industry observers have been speculating about the role Lands' End would play in an expanded new company since the merger was orchestrated last fall by Kmart chairman and Sears shareholder Edward Lampert.

"It doesn't seem to have panned out the way Sears thought it would," Morningstar analyst Kim Picciola said of the Lands' End acquisition. "They were looking to attract a consumer who was going to purchase at a higher price point, and it just didn't happen.... It might be easier for Lampert to make that decision" to sell, she said.

Sears CEO Alan Lacy made the decision to buy Lands' End in the spring of 2002 for $1.9 billion, hoping it would revive long-sluggish apparel sales and become a marquee brand in the company's department stores. But sales from the more upscale clothing and home accessories retailer have fallen short of expectations, and analysts have viewed it as a bad fit with Kmart.

UBS retail analyst Gary Balter said in an investment note that selling Lands' End would make sense for the merged company, which is to be called Sears Holding Corp.

"We believe that Lands' End has too much value as an ongoing entity to be part of the combined Sears Kmart," he said. "Sell off assets that have more value outside the company and reduce expenses and drive gross margins within. Lands' End in our view is the biggest single asset of value and selling it would be a good step."

Speculation about a potential sale was heightened last month after Hoffman Estates-based Sears announced a restructuring of Lands' End that included closing a phone center and eliminating 375 jobs.

Lands' End was founded in 1963 as an outfitter for sailing enthusiasts and grew to become the nation's largest specialty clothing catalog company.

On the Net:

www.sears.com