Sears Holding Corp. (NASDAQ: SHLD) is mulling the sale of its Land's End clothing line, estimated to be worth more than $1 billion, to private equity firms, according to the Wall Street Journal, as the company struggles with a lack of cash.
Retail analyst for Credit Suisse Gary Balter estimated the outdoor gear brand could fetch between $1.2 billion to $1.6 billion, a loss from the $1.86 billion Sears paid for it.
We continue to believe that Sears will sell off or spin off assets in a controlled liquidation of its chain, monetizing the assets least tied in with Sears US stores first, he said in a note, according to Reuters.
A sale of Land's End would not come as a surprise. Sears Chairman Edward Lampert alluded to the possible sale of the catalogue-based apparel line in February, in his annual letter to shareholders.
Sears Holdings has a very clear strategy to manage the liquidity of our business, both short term and long term, he wrote, adding While some of these sources of cash are immediately available, some may require slightly more time, but a substantial amount is available to use in six months or less, with more available in six to twelve months. Should the circumstances warrant, we also have the ability to access or release value through our ownership of 95% of Sears Canada and 100% of Lands' End, as well as our substantial real estate portfolio.
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Sears reported a loss of over $3 billion in 2011 and 19 months of declining sales, as other brick-and-mortar competitors and online retailers chipped away at its customer base. The Hoffman Estates, Ill.-based retailer has been trying to spin off its Hometown stores franchise, as well as sell 11 of its mall locations around the country to raise $770 million in cash.
Lampert controls roughly 61 percent of the company through his hedge fund, ESL Investments Inc.
The sale of Land's End remains a far-from done deal, as some equity firms like Blackstone Group have balked at the offer. Nor would such a move get a positive reception on the Street.
Over time, selling off the profitable assets is unlikely to be a winning strategy, Credit Suisse's Balter said.
Shares fell 30 cents to $67.25 in midday trading.