With many retailers cutting forecasts for the second half, credit professionals now expect Sears Holdings Corp. to reveal a sale of some kind to alleviate liquidity concerns when the retailer posts second-quarter results on Thursday.
The company possibly could sell the service-protection business connected with home appliances, or there could be more real estate asset sales, credit sources said.
That’s in part because chief financial officer Rob Schriesheim said at the end of the fourth quarter that “we expect to generate at least $500 million of additional liquidity through monetization of assets over the next 12 months.” He emphasized that Sears Holdings is an “asset-rich enterprise with substantial liquidity, unencumbered real estate and well-established stand-alone businesses, including Lands’ End and Sears Canada.”
According to one credit analyst, “There’s a very good chance of [an asset sale] happening. Many retailers are reporting lackluster earnings because consumer spending has slowed in the quarter. If really strong retailers such as Macy’s have not comped well, it’s hard to believe that Sears has outperformed anyone.”
He added that Sears Holdings had a big cash burn rate in the first quarter, due to Sears’ business, even though it likely picked up some apparel sales from J.C. Penney.
Another credit analyst said Kmart has been hurt by lower discretionary income among its customer base when the payroll tax increase went into effect in the first quarter.
One asset many believe should be sold is Lands’ End, which former chief executive officer Alan Lacy acquired in 2002 for $1.86 billion, before the merger of Sears and Kmart and when Sears was then Sears, Roebuck & Co.
Financial sources said Sears had pitched Lands’ End to private equity firms in 2012. These individuals also said that a few strategic buyers kicked the tires, and there were even offers for the business in the $1 billion range, far lower than the asking price of $2 billion.
Sears Holdings doesn’t break out the financial performance for Lands’ End, but market sources said that the operation is a $3 billion business.
An executive who makes recommendations on credit risk for his apparel firm said, “I think Sears has to make changes to Lands’ End. It’s a good model, but it needs to be spun off if they don’t find a buyer. Lands’ End is like a Lexus in a Toyota showroom: The business has value.” This executive added that the operation has been hurt over the years as Lampert, in cutting back on capital spending, hasn’t reinvested into the business.
In September 2012, Sears restructured the operation such as its warehousing and call center, citing the growth in online shopping as the reason. Those moves resulted in the layoff of nearly 200 staffers.
Like Lands’ End, the profitable service-protection business has been shopped to potential buyers.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty