Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Sears Holdings (SHLDQ) were looking stronger today, finishing up 12% after the retailer said it may spin off its Lands End and Auto Center franchises.
So what: This isn't the first time we've heard such a plan out of the aging retailer as last year it spun off part of its Canadian unit, and investors seem to see it primarily as an asset play. In a press release this morning, Sears said, "We are evaluating separating both our Lands End and Sears Auto Center businesses to become a more focused company that is easier to understand and to manage." The plans would be to spin off Lands End to current stockholders, making it a separate publicly traded company. The company also provided a guidance update, saying same-store sales had fallen 3.7% in the last 12 weeks, and it expects a net loss of as much as $582 million in the third quarter, worse than a year ago.
Now what: While there may be some hidden value in Sears' assets -- the company bought Lands End in 2002 for $1.9 billion -- the core of the company is still broken. Same-store sales have been declining for several quarters and management seems to have made little effort to revamp the central retailing part of the business, and may not be able to as the environment has changed with the rise of Amazon.com and others. Announcements like today's may be enough to boost the stock, but it seems like over the long term, with $4 billion in debt and other problems, Sears is headed for the dustbin.
