Sears, Roebuck & Co agreed to buy Lands' End Inc for US$1.9 billion, gaining a catalog and Internet retailer known for polo shirts, khakis and deck shoes as the largest US department-store chain tries to stem a 15-month decline in clothing sales.
The US$62-a-share offer is a 22 percent premium to Lands' End's closing price Friday. Sears will issue about US$1.5 billion in debt to fund the acquisition, Chief Executive Alan Lacy said in an interview. The transaction may reduce profit this year and next, and raise it in 2004, Sears said.
Sears will start selling Lands' End apparel in some of its 870 department stores this fall to capture more upscale shoppers.
Lacy has been remodeling stores and developing private brands in an attempt to persuade customers who shop for appliances and electronics at Sears to give clothing a try, analysts said.
"Sears has shown no expertise in apparel," said David Abella of Rochdale Investment Management Inc, which holds 92,377 Sears shares in about US$1 billion in assets. Rochdale sold Lands' End this year. "My concern for Sears is that they're paying a lot for it, but you have to pay for a top brand."
Shares of Illinois-based Sears rose US$0.19 to US$52. They have gained 37 percent the past year. Lands' End surged US$10.71, or 21 percent, to US$61.73.
Lands' End also will boost Sears's sales on the Web, where it doesn't sell apparel, and increase its ability to process orders for catalog and Internet customers. The Sears Customer Direct unit generates about US$500 million in sales, Lacy said.
Lands' End Chairman and founder Gary Comer owned about 15.6 million shares as of March and will get more than US$970 million based on the US$62-a-share price. Comer, a weekend sailor, left advertising 40 years ago to start a mail-order nautical-supply business that later added clothing. By last year, Lands' End's sales reached US$1.57 billion.
Sears's long-term debt rating was lowered by Moody's Investors Service after the announcement. Sears's rating was cut one notch to "Baa1" from "A3" because of the increased operational risk the company is undertaking with the purchase, Moody's said in a statement. Moody's couldn't immediately be reached for comment.
Lacy's expansion on line comes as one of Sears's biggest rivals, Federated Department Stores Inc, pulls back. Federated has stopped mailing Fingerhut catalogs and has fired about half of the unit's 6,000 employees as it closes the division. Federated struggled to stem losses at Fingerhut, which served a lower-income customer than those at the company's Macy's and other department stores, analysts said.
"Federated took on more than they bargained for" when they bought Fingerhut, Abella said. "If they had bought Lands' End and put it in their stores, maybe they'd have done well."
Sears's purchase of Lands' End also comes almost a decade after Lacy's predecessor Arthur Martinez eliminated the company's Big Book catalog, and fired thousands of workers, to slash costs.
The telephone-size catalog offered the full range of products that were available at Sears stores, Sears spokeswoman Peggy Palter said.
"It was very expensive to offer everything to everyone," she said. Specialized catalogs work better because they can be sent to a smaller group of customers with an interest in those products, she said.
As much as 20 percent of the space Sears devotes to clothing in its stores will be Lands' End products, the company said.
Apparel currently generates about US$6 billion, or 15 percent of annual sales at Sears, whose other brands include Canyon River Blues and Apostrophe.
"What we've really lacked is a powerhouse brand in softlines that really stands up to the same kind of brand that we have in the hardlines side," Lacy said.
David Dyer, Lands' End's president and chief executive, will continue to lead the Dodgeville, Wisconsin-based retailer as a Sears subsidiary.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique