Sears Shares Leap as Retailer Debuts Restructure Plan
Retailer Sears Holdings, looking to turn around its business after recent profit declines, detailed a new structure that separates its business units and simplifies the way they are managed, and its shares shot up as much as 19 percent.
The retailer controlled by hedge fund manager Edward Lampert said it will have five business units under the new decentralized structure: operating businesses, support, brands, online and real estate.
Each unit will have a leader and an advisory group including senior Sears Holdings executives who will oversee performance.
"I think this is what a lot of value shareholders like myself have been expecting for some time, to be able to take this company and split it apart so we can really look at it in terms of its asset value separate from its operational value," said Scott Rothbort, president of LakeView Asset Management in Millburn, N.J.
Sears Holdings , formed in the 2005 merger of Kmart and Sears, said the move will allow individual businesses to operate more efficiently and give them greater power to focus on consumers.
"At the time of the merger, a centrally managed structure was essential to control costs and focus on integrating the two companies," Lampert said in the statement. "Now, it's time to empower individual businesses and teams to focus on the customer experience and performance."
In recent years, Sears has struggled to win customers from a host of competitors and now faces an economic slowdown that has hurt sales of home goods such as appliances and tools.
The retailer warned last week that fourth-quarter profit would be less than half that of a year ago and said its holiday sales fell as the crumbling U.S. housing market and competition hurt business.
Sears Holdings has reported profit declines for the past two quarters, and sales at stores open at least a year have fallen at both Kmart and Sears for the past seven quarters.
The company said its operating business unit will include current product lines such as appliances, apparel and electronics. Support units will include marketing, store operations and customer strategy. The real estate and online units will focus on increasing the "sales productivity" of real and virtual holdings.
Sears Holdings shares are down about 49 percent from a high of $195.18 reached in April 2007.