Investors haven’t been too thrilled with the new company and shares are down over 10% since the spin. Part of this is likely due to the fact that overall financial performance has been trending downward since at least 2008. The company has suffered from a lack of investment and focus so perhaps a spinoff is exactly what it needs to turn things around. With the recent share price drop, the company’s market cap is below $900m or less than half of what Sears paid for it back in 2002. Talk about value destruction! Of course, part of the share price drop could be due to SHLD owners dumping small stakes of the new company.
The sad part is that Sears, despite receiving a $500m cash dividend from Land’s End, has also been trading down since the spin as many feel that it lost of its best performing assets. Reactions to CEO and largest shareholder Eddie Lampert’s slice and dice strategy are varied. Some people feel he is destroying the company by removing all of the good pieces, while others view these moves as necessary in order to survive. Time will tell, but given his propensity for spins, I eagerly await his next ‘value creation’ idea.
Disclosure: Author holds no position in any stock mentioned.