WASHINGTON – Department store operator Sears, Roebuck & Co. (S) is seeking a buyer for its Lands' End (search) catalog company, at an asking price below the $1.9 billion it paid in 2002, Women's Wear Daily reported on Tuesday.
Citing financial sources in the mergers and acquisitions community, WWD said in its online edition that Sears had put a price of $1.2 billion on Lands' End in presentations it made to a few select companies and individuals.
Texas Pacific Group (search), the majority stakeholder of retailer J. Crew, is one of those said to be looking at Lands' End, WWD said, citing bankers and one financial analyst in New York who requested anonymity. The buyout firm declined to comment.
Also named was David Dyer, president and chief executive of Tommy Hilfiger Corp. (TOM) and former president and CEO of Lands' End. A representative from Tommy Hilfiger declined to comment.
Sears, which in November agreed to be acquired by discount retailer Kmart Holding Corp. (KMRT) for nearly $11 billion, also declined to comment. As the deal enters the final stages — shareholders of both companies are set to vote on it on March 24 — analysts speculate the two sides may be looking to shed assets.
Some in the investment community have said Lands' End is an awkward fit with Sears.
"I'd like to see them get a good price for it ... If they could get $1.2 (billion) that would be good for Sears. It hasn't worked well into their strategy. The brand doesn't seem to fit very well," said David Goerz, chief investment officer at HighMark Funds, which holds Sears shares.
Lands' End said last month it would cut more than 375 jobs and streamline its business operations in a restructuring that follows a drop-off in phone orders as customers opt to purchase goods in other ways, including online.
"In the context of Sears going forward, it will be easier for them to complete the merger and integrate Kmart without having to worry about what to do with Lands' End," Goerz added.
One analyst agreed the speculated price tag would not be wide of the mark and said any sale would smooth the way of the merger.
"We believe Lands' End has too much value as an ongoing entity to be part of the combined Sears Kmart," UBS analyst Gary Balter said in a research note, adding his cash flow analysis assumed a price of about $1.35 billion for the operation.
"The Sears/Kmart story will work if the company follows the recipe that we witnessed at Kmart," Balter said. "Sell off assets that have more value outside the company and reduce expenses and drive gross margins within. Lands' End in our view is the biggest single asset of value, and selling it would be a good step toward our investment thesis."
WWD said it was not known which firm was handling the sale of Lands' End. However, the article said several financial sources in New York were speculating that Goldman, Sachs & Co. (GS) was the likely front-runner because of connections with Kmart Chairman Edward Lampert and William Crowley, the chain's senior vice president for finance, who both worked there in the past.
Shares in Sears were up 0.6 percent or 35 cents at $58.35 on the New York Stock Exchange. Kmart stock rose 0.9 percent or $1.17 to $129.92 in busy dealings.