This week's hot rumor, courtesy of Women's Wear Daily and some friendly "anonymous sources," is that Sears
If true, it would be yet more proof that the so-called synergies of retail mergers can end up falling flat. Back in 2002, plenty of bullish analysts were talking about how the premier catalog retailer would not only thrive thanks to Sears' marketing firepower, but also that its fashionability might reinvigorate the mighty old giant.
Neither of those things seems to have happened. There have been some recent victories on the revenue front, but so far, they look like aberrations in a low, slow sales slide.
Assuming lackluster performance under Sears, what is Lands' End worth? That will be tough for the Street to figure out. A number being thrown around in the press is $1.2 billion. Back when Sears nabbed it in 2002, it paid $1.9 billion, or about 1.2 times sales, which is, as I pointed out recently, close to the 1 times sales that InterActiveCorp
But Cornerstone is no Lands' End. Its revenues have likely been growing at a greater clip than at Lands' End -- though only insiders will know for sure, since the sales aren't broken out in the reports. On the other hand, Lands' End is a brand name everyone knows. Its sagging sales are probably best explained by its being shackled to a slow-witted dinosaur like Sears.
Once it's busted loose, who's to say what it might earn? What would that be worth now? I'm going to have to agree with the analysts who are saying $1.2 billion sounds too cheap. You'd think that Eddie Lampert -- who has made Kmart shareholders rich by selling off lucrative chunks of property -- will be dreaming big and trying to extract the maximum price for this premier bit of Sears.
For related Foolishness:
- InterActive keeps eating.
- What do you get when you tie two drunks together and point them down the road?
- How sweet is the Sears-Kmart Deal?
- Is Target the target?
- Does Sears finally get it?
Seth Jayson has been to land's end in Spain -- he walked there from France, ugh -- but at the time of publication, he neither shopped at Lands' End nor had positions in any company mentioned. View his stock holdings and Fool profile here. Fool rules are here.