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Sears Holding Co. (SHLD) to Restructure

Sears Holding Co. (NYSE: SHLD) a bastion of American retailing whose components include both K Mart and Sears Department Stores, may be on the verge of a massive restructuring. Edward Lampert, the hedge fund executive and chairman of Sears Holding, may be planning a move to significantly transform the way the retailer is organized to boost the retailer’s sagging business. Sears and K Mart, as have other retailers, have faced a difficult business climate recently, which has seen their earnings growth fall and their stock price decline along with that.

Shares of Sears have been trading under the $90 level recently (though it rebounded to $107 share today) on the New York Stock Exchange, down from a 52 week high of over 195, and they’ve seen their earnings prospects drop, given the increasing slowdown in consumer spending. Lampert, who has made successful investments in such companies as AutoZone (NYSE: AZO) and AutoNation (NYSE: AN), is an experienced hedge fund investor. Lampert also scooped up K Mart debt while the retailer was in Chapter 11. Sears insiders said Lampert would employ a strategy more common to hedge funds and those particularly used in leveraged buyouts, where Sears Holding would organize its business units to be more independent and de-centralized to respond more quickly to changing business conditions, or to be more readily spun-off or disposed of should Lampert so decide.

The newly organized Sears might consist of as many as more than thirty business units, each of which would have a large degree of operating independence. The move would attempt to bolster both cost saving efficiencies and business focus in the components. In addition to the Sears and K Mart franchises, Sears Holding has a significant amount of real estate, as well as brand name lines of products such as Kenmore appliances and Craftsman tools. Lampert has been criticized by some investors for failing to maximize the financial prospects of Sears Holding since he’s taken over the helm.

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