Lands' End will be back on its own as a publicly traded company following a formal announcement by parent company Sears Holdings to spin off the well-known apparel brand.
The move follows years of speculation that Sears would divest the brand, which it acquired in May 2002 for $62 a share. At the time, Lands' End was a publicly traded company with revenues of nearly $1.6 billion, profits of $67 million and earnings per share of $2.23. The $62 a share Sears paid 12 years ago represented a 21.5% premium over the closing pricing of $51.02 prior to the announcement of the deal.
Following the spin-off announced over the weekend, Lands' End will be a publicly traded company independent from Sears Holdings and Sears Holdings will not retain any Lands' End common stock.
To execute the transaction, Sears is performing what’s called a “pro-rata spin-off transaction.” Sears Holdings will distribute all of the outstanding shares of common stock of Lands' End on a pro rata basis to holders of Sears Holdings common stock. Sears Holdings stockholders will receive roughly one third of a share of Lands' End common stock for each share of Sears Holdings common stock.
The Lands' End deal follows what was a difficult year for Sears Holdings. During the fourth quarter, the company reported a loss of $358 million compared to a prior year fourth quarter loss of $489 million. For the year, the company said it lost $1.4 billion compared to a loss of $930 million. The extent of the company’s losses last year, although sizeable, were less than the prior year and chairman and CEO Edward Lampert offered a positive outlook at the time.
"During 2013, we made progress in our continuing transformation into a member-centric retailer leveraging Shop Your Way and integrated retail, which we believe will position us for enhanced growth and profitability to create long-term shareholder value," Lampert said. “Our full year results are impacted during this transformation as we continue supporting traditional promotional programs and marketing expenditures while we invest in our Shop Your Way program and integrated retail strategy. We have been investing hundreds of millions of dollars annually in our transformation and will continue to invest in the future of the company."
So far, the company’s investments have been slow to yield sale growth. Fourth-quarter same store sales at Sears declined 7.8% while Kmart’s comps dropped 5.1%. For the year, Sears comps decline 4.1% and Kmart declined 3.6%.