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Sears Unit Sells Alberta Mall Stake

Zacks Equity Research

Sears Canada Inc., a unit of leading U.S. broad line retailer, Sears Holdings Corporation (SHLD), has agreed to offload its 40% ownership of the leasehold interest in Medicine Hat Mall in Alberta. The company will transfer its interest in the Mall to its joint venture partner Sleeping Bay Building Corp. Sears has finalized the deal for a sum of $43 million (pre-tax).

However, the company assured that it will continue to operate its store in the mall and the sale will not impact the employees or its business. The company’s store has been operational in the Medicine Hat Mall since 1978. The store was initially set up a different location in 1960.

Additionally, in a separate release, Sears Canada announced a special dividend of $1.00 per share or $102 million, payable on December 31, 2012 to shareholders with record on December 24, 2012.

Sears Holdings has long been grappling with soft top-line performances and even weaker bottom-line results. However, the measures undertaken to revive the operating performance are showing some signs of improvement as is evident from the company’s EBITDA growth and narrower loss per share reported in the most recent quarter.

Sears Canada is a 95%-owned subsidiary of Sears Holdings and operates as a multi-channel retailer with about 195 corporate stores, 269 hometown dealer stores, 8 home services showrooms, over 1,500 catalogue and online merchandise pick-up locations, 102 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The company also publishes Canada's most extensive general merchandise catalogue and offers shopping online at www.sears.ca.

In an effort to enhance its liquidity position, Sears Holdings completed the partial spin-off of 45% of Sears Canada’s common shares to the company’s shareholders on November 13, 2012. The company also successfully completed the separation of Sears Hometown and Outlet Stores Inc. on October 11, 2012, raising $446.5 million in gross proceeds.

Sears Holdings continues to take the actions necessary to create value and retain the flexibility to invest in its strategic priorities. Further, the company remains focused on cost containment, inventory management, and merchandise initiatives to improve margins through leveraging buying and occupancy expenses.

Sears Holdings, which competes head-to-head with Wal-Mart Stores Inc. (WMT) and Target Corporation (TGT), currently has a Zacks #4 Rank, implying a short-term Sell rating. However, we retain our long-term Neutral recommendation on the stock.

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