Sears Holdings Corp. shares soared more than 20 percent Thursday after the company announced plans to spin off several businesses and sell some properties to appease Wall Street by strengthening its balance sheet and boosting liquidity.
Shares of Sears rose $9.34, or 17.95 percent, to $61.40 in afternoon trading. Earlier in the session shares rose to $64.20, a gain of 23.27 percent.
The Hoffman Estates, Ill., company intends to spin off its Sears Hometown and Outlet businesses and certain hardware stores through a rights offering expected to raise $400 million to $500 million, Chairman Edward Lampert said in a letter.
The rights will entitle but not obligate holders to buy shares in the combined Sears Hometown and Outlet Stores businesses and certain hardware stores.
Sears also said Thursday it will sell 11 stores to General Growth Properties for $270 million. The company did not indicate which stores would be sold.
The actions come as business lenders such as CIT Group Inc are closing monitoring Sears.
The actions of the asset sales and business separations of the outlets and hometown stores is management showing the Street that it can pull liquidity levers if it so chooses, Morningstar analyst Paul Swinand told Reuters.
Moody's said Thursday afternoon there was no immediate threat to Sears' credit rating due to the sale.
Sales at the company have fallen every year since Lampert formed it in 2005 by merging two of the most well-known American chains in an $11 billion deal.
Sears reported a big quarterly net loss on Thursday after a poor showing during the holiday season. The net loss was $2.4 billion, or $22.47 a share, compared with a profit of $374 million, or $3.43 a share, a year earlier.
Excluding one-time items, Sears earned 54 cents a share.
Sales fell $518 million to $12.5 billion for the quarter, which ended January 28. Sales at its U.S. stores open at least a year fell 3.4 percent, including a 4.1 percent decline at its namesake department stores and a 2.7 percent fall at Kmart.
On Wednesday, the company's Canadian unit, Sears Canada Inc., posted a more than 50 percent drop in quarterly earnings.
One of my big concerns is still Sears Canada, which was a jewel but is now looking like it's going south, too, Swinand said.
Additional Reporting by Dhanya Skariachan of Reuters.