Once the credit card division is sold, will Sears still be offering sales on credit, taking a piece of the profit, without any exposure to the loans? Also, what part of the earnings per share is currently, directly due to the credit card unit? What will the earnings be after the unit is sold?
Gambler, Great question!!!! I think think the sale of the cc division will bring 8 bilion above the outstanding balance. After that they will demand a credit, that will go to the bottom line on any "specials". They will not get a cut of the spread with the priemum they will get, but us shareholders will get one hell of a dividend. You can look up the EPS yourself. After the sale, if there is one, the eps is up for grabs depending on whether they buy back shares, issue a dividend, plow money into their retail efforts.
Once Sears sells the CC business the buyer will continue to provide credit for retail purchases. For example GE Capital bought JC Penney's CC business and still provides credit. They also do this for Lowes, Macys,Walmart, and many others. The typical co-brand deal gives 1% of revenue to the company (Sears) which would be about $50 million payment based on $5 billion revenue.
That is interesting reading your examples of Lowes,Macys,Walmart, and JCP.
Does anyone know what percentage of total sales these above companies did on their CC's?
Sears is something like 40% of all sales were with one form or another of their credit cards. Since such a high % of retail sales were by consumers using one of Sear's cards, the relationship details are very important between the potential new buyer of the cc portfolio.
The cc contributed 60% to the bottom line net for S in 2002. The contribution to gross profit before ebidta or whatever was probably closer to 70%. One of my main points on this board has been that S will be a totally different company once the cc is sold. Thus no one really knows what the new S will really be like going into 2004 ===>. It may be more than fully valued at $32 so the stock might decline even with a reasonable sale price. My extrapolation for earnings is around $1.75 +- $.25 for changed sales,marketing, cc offsets to sales prices, etc.
60% of sears 1.6 billion in earnings, or about 1 billion came from the CC division last year. Sears had 200 million in earnings in Q1 and the retail division lost 32 milion, or 23 million? I don't remember exactly. I'll have to look it up.
Personally, I think an optimistic estimate is EPS somewhere between $2.00 and $2.50 next year without the CC division. It all depends on how the sale is done and what portion of the profits if any sears can get if the maintain a relationship with the acquirer.
I just looked it up. Sears lost 23 million in Q1 from retail and related services. This compares to a positive net income of 87 million in the prior year. Net difference of 110 million. Sears still claims net income from retail and related services should be up. When Sears gave their 2003 outlook in January they said they expected the operating income from retail and related services to grow in the mid teens. Not sure how they are going to pull this off based on the Q1 numbers and the poor sales so far in Q2.