Sears Plans to Spin Off Lands' End

HOFFMAN ESTATES, IL-Sears Holdings Corp. said Friday that it would spin off its Lands' End business by distributing common shares to investors. Sears had paid $1.9 billion in 2002 to acquire Lands' End, which generated revenues of $1.6 billion in 2012, mainly through online and catalog sales.

In connection with the planned spin-off, which is subject to approval by the SHLD board of directors, Lands End Inc. on Friday filed a registration statement with the SEC. In the SEC filing, Lands End says it plans to continue its ongoing “digital transformation” of both selling and operations; increase its product offerings; expand its international business; grow its business and school uniform platform; and optimize and develop its retail business.

“We intend to focus on increasing sales productivity in our existing Lands' End Shops at Sears in the United States and to explore additional retail opportunities,” according to the Lands' End filing. The store-in-a-store Lands' End Shops at Sears, launched in 2005, account for 16% of revenue at Lands' End.

Following the spin-off, the 50-year-old Lands' End will be a publicly traded company independent from SHLD, and SHLD will not retain any Lands' End common stock. Edward Lampert's ESL Investments Inc., which earlier this week reduced its holdings in SHLD to less than 50% for the first time since 2008, would own approximately 48.4% of the outstanding shares of Lands' End common stock. The spun-off company intends to trade under the ticker LE.

The SEC filing cites a number of benefits of a spin-off for both SHLD and LE and investors in the respective companies. Among them are: simplified focus and operational flexibility; business-appropriate capital structures for each company; focused management at both companies; and investor choice. SHLD earlier this year sold its Sears Home and Outlet Stores unit, and may do the same with Sears Auto Centers.