Sears to sell Craftsman, shut 150 stores
Retailer continues to stem losses as sales drop 12-13% over the holidays
Sears Holdings Corp. agreed to sell its Craftsman tool brand to Stanley Black & Decker Inc. for about US$900 million, marking CEO Edward Lampert’s third move in the last two weeks to prop up the beleaguered retailer with fresh sources of funding.
Stanley will pay US$525 million at closing and US$250 million after three years, the companies said in a statement Thursday. The buyer also will make annual payments on new Craftsman sales for 15 years.
Separately, Sears said it’s closing 150 more stores, part of a program to shrink the retailer’s physical presence to stem its continued losses. The company posted another grim sales report Thursday, with comparable-store sales declining 12 per cent to 13 per cent during the holiday period.
“We will continue to take actions to adjust our capital structure, meet our financial obligations and manage our business to better position Sears Holdings to create long-term value,” Lampert said in Thursday’s statement.
Sears Canada is a separately owned company and is not directly affected by the U.S. company’s moves.
With Sears’s department-store business continuing to bleed cash, Lampert has turned to selling and spinning off assets to keep the company operating. The hedge fund manager, who also is the retailer’s chairman and largest investor, agreed earlier this week to lend the company US$500 million and said last month that affiliates of his firm would offer it a US$200-million letter of credit. Sears also has been reviewing its DieHard batteries and Kenmore appliance brands for potential sales.
The Craftsman sale is “another piece of the puzzle of trying to cobble together enough liquidity to navigate ‘17,” said Noel Hebert, an analyst at Bloomberg Intelligence. “But the more you sell to fund losses, the less there is to sell.”
Hebert also said the price Sears sold the unit for was “disappointing.”
Investors cheered the moves, sending Sears up as much as 8 per cent to US$11.19 in New York. The stock had slumped 55 per cent last year as the company continued to post losses. Shares of Stanley advanced as much as 3.6 per cent to US$120.69.
Craftsman has been part of Sears since 1927, when the retailer acquired the brand for US$500. The tools debuted in the iconic Sears catalogue two years later. By the 1940s, the brand benefited from a surge in power-tool sales.
In 1981, U.S. president Jimmy Carter was given a Craftsman woodworking set as his farewell gift when he left the White House.
“Craftsman obviously has been somewhat challenged under Sears and arguably hasn’t achieved its full potential,” Justin Bergner, an analyst at Gabelli & Co., said in an interview.
The brand “does have good recognition,” especially among older consumers, he said.
For Illinois-based Sears, the sale is the latest in a long string of moves designed to generate cash for the ailing retail business.
Lampert has spun off the Sears Hometown & Outlet business and Lands’ End clothing line, and the company raised US$2.5 billion in 2015 by forming a real estate investment trust that bought more than 250 of its properties.
And more property sales may be coming. This week’s US$500 million loan was secured by the company’s real estate in anticipation that a future sale of some properties could help pay back the debt.
The retailer also has been closing poor-performing locations, an effort it continued with Thursday’s announcement.
The company said it will shut 109 Kmart and 41 Sears stores, and it reiterated its intention to squeeze more money out of its real estate.
Still, challenges remain. Sears needs to raise a total of roughly US$1.5 billion to make it through 2017 comfortably, Christina Boni, an analyst at Moody’s Investors Service, has estimated.