Struggling Sears eyes spinoffs, some closings

Shoppers walk into Sears in Peabody, Mass. Sears

Shoppers walk into Sears in Peabody, Mass. Sears is considering separating its Lands' End and Sears Auto Center businesses from the rest of the company, the retailer announced on Oct. 29, 2013. (May 14, 2012) Photo Credit: AP

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It's like watching an old friend slowly fall apart.

Sears was once the place where families could go for an afternoon of one-stop shopping for everything from clothing to appliances to car parts. But it has struggled in recent years amid declining sales and stiff competition.

Now, Sears, which runs 2,500 Kmart and Sears stores, is considering separating its Lands' End catalog business and Sears Auto Center businesses from the rest of the company, and it plans to continue closing some unprofitable stores and sell some store leases in Canada.

The announcements came Tuesday as Sears warned that it expects a loss of $582 million in the third quarter on another drop in sales. The company said that for the 12 weeks ended Saturday its sales at stores open at least a year fell 3.7 percent.

Sears stock closed up nearly 12 percent at $62.09.

Sears equity "remains a melting ice cube, with asset sales and spinoffs the clearest path to justifying the share price," noted Greg Melich, an analyst at International Strategy & Investment Group LLC, in a report published Tuesday.

The moves underscore the intense pressure facing billionaire hedge fund manager and chairman Eddie Lampert, who took over as CEO in February to turn the business around. The storied retailer hasn't adapted as bigger, nimbler rivals such as Wal-Mart and The Home Depot have stolen away customers over the years.

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Last year, Sears announced plans to restore profitability by cutting costs, reducing inventory, selling off some assets and spinning off others.

But critics say Sears hasn't managed to solve its core problem: Its stores aren't inviting to shoppers. "The stores are horrifically out of date," said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors. "The shopping experience is depressing."

Sears said it likely will pursue a spinoff of Lands' End, which it bought in 2002, to shareholders and not an outright sale. "We believe that Lands' End is an iconic brand with the potential to become a more global brand," said a Sears statement.

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