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Sears Holdings' Subsidiary to Vend JV Stake

Zacks Equity Research

Sears Canada Inc., the subsidiary of Sears Holdings Corporation (SHLD), has agreed to sell its 50% joint venture (:JV) interest in eight properties to Montez Income Properties Corporation. However, the JV partner, The Westcliff Group of Companies will continue to own the remaining 50% ownership stake in the properties and will be the exclusive manager. The transaction, which is expected to close on Jan 8, 2014, will fetch nearly $350 million.

The broadline retailer’s subsidiary revealed that these stores will continue to operate even after the deal’s completion and neither the staff nor customers will be affected. We believe the company’s latest move to be a strategic initiative toward enhancing liquidity and improving operating performance.

Prior to this, on Oct 30, Sears Canada had announced the sale of five stores that are leased to Cadillac Fairview Corporation Limited for a total sum of C$400 million.

Sears Holdings has long been grappling with dismal top and bottom-line performance. In an attempt to improve its financial health, the company recently announced certain measures to enhance growth prospects. These include the reduction of investment in sections of the company that does not significantly contribute to growth.

In this context, last month, Sears Holdings announced its intention of spinning off the Lands’ End and Sears Auto Center businesses. The separation is expected to provide an additional liquidity while focusing on its core business.

Further, Sears Holdings is focusing on cost containment, inventory management and merchandise initiatives to inflate margins. We commend the company’s strategy of capitalizing on opportunities, while increasing profitability through its revamped organizational structure and new operating model. All these measure will expectedly drive top and bottom-line growth.

Other Stocks to Consider

Sears Holdings currently holds a Zacks Rank #3 (Hold). Other stocks that are worth a look in the retail-discount space include Big Lots Inc. (BIG), The TJX Companies, Inc. (TJX) and PriceSmart Inc. (PSMT). All of these have a Zacks Rank #2 (Buy).

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Read the Full Research Report on TJX
Read the Full Research Report on PSMT

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