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Sears Gives Up, Files for Land’s End Spin-Off

Paul Ausick

In a terse press statement Friday morning, Sears Holdings Corp. (SHLD) said that it has filed with the U.S. Securities and Exchange Commission (SEC) to spin off its Land's End stores in a distribution to current Sears stockholders of all shares in a new company, Land's End Inc. The transaction is expected to be tax-free.

Lands' End is usually thought of as one of the company's most attractive brands, but in 2012 it shared the responsibility for 120-basis point drop in Sears' domestic gross margin. It also shared the blame for a 180-basis point drop in 2011.

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In late October, Sears said it had begun exploring the possibility of separating its Land's End and Auto Center businesses from the retail operations of Sears and Kmart stores:

We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent, and allocate capital in a more focused manner while bringing our business unit structure to life outside of the Sears Holdings portfolio.

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Less than two weeks ago, there was a report that Sears was talking to bankers about selling its 51% stake in Sears Canada.

If the sale of Sears Canada goes through and Sears figures out what to do with its Auto Centers, the company is well and truly finished. Sears and Kmart stores cannot continue to operate at a loss, and there is no reason to believe that the retail businesses will turn around. Eddie Lampert will come up with a way to get maximum value for the company's real estate, and then the stores will go dark. There is really no other option except to bleed to death slowly.

We did a story last summer predicting that Sears would beat J.C. Penney Co. Inc. (JCP) in the race to oblivion. There is really little satisfaction in saying we told you so.

Sears shares closed at $49.98 on Thursday night and were up about 1.6% to $50.80 in after-hours trading. The stock's 52-week range is $38.40 to $67.50.

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