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Sears asset sell-off an open question

Some are hoping that this tightening ­­­credit market will move embattled Sears Holdings Corp. to sell off real estate. Analysts say the company can no longer rely on its properties and other assets to keep investors happy. “With the asset-value argument harder to support in this environment, earnings has become an important driver of this stock,” said Gary Balter, a Credit Suisse analyst. “Yet, as we saw again with the holiday results, it doesn't take much for these types of secondary players to post weak sales.” Balter says the company could sell some of its stronger stores or its Canadian division, or turn its real estate into a REIT. Sears still holds considerable assets that it can deploy. It owns real estate valued at between $4 billion and $6 billion and distribution centers valued at $200 million to $400 million. Its home services division, which offers appliance repair services, is valued at $1 billion to $1.5 billion. In addition, the company still owns the Craftsman, DieHard and Kenmore tools and appliances brands, which are valued at a total of $1 billion to $2 billion, and the Lands' End apparel company, whose valuation is between $1 billion and $1.5 billion.

Sears may just be in a temporary rut, some say. Bear Stearns analyst Christine Augustine, for one, is betting that the company's focus on marketing, merchandising and inventory management will pay off starting next year. Same-store sales for the nine-week period ended Jan. 5 dropped 2.8 percent at Sears units and 4.2 percent at Kmart stores. Analysts forecast profit for 2007 to be somewhere between $350 million and $470 million, down from $820 million a year ago. For now, though, Sears seems to be determined to hold onto its stores. “We talk to them all the time,” said Robert A. Michaels, COO of General Growth Properties, at an investor conference. “And the answer we get is that they expect to stay in the retail business. We'll see no change in 2008.”

Wal-Mart perfects its green stores

Wal-Mart is taking its sustainable Supercenter experiment to the next level. In the Chicago suburb of Romeoville, Ill., the chain opened the first of a generation of energy-efficient stores incorporating best practices from experimental stores it has been testing since 2005. The new Supercenters, known internally as HE.2 stores (HE stands for high efficiency), use white roofs, low-flow bathroom faucets, light-emitting-diode signage, secondary-loop refrigeration systems and other measures to operate at 25 percent greater efficiency than traditional Wal-Mart Supercenters. The retailer will open four additional HE.2 stores later this year at undisclosed locations around the U.S. to determine the effects of different climates on energy efficiency. Wal-Mart's goal is to reduce energy emissions by 25 to 30 percent by 2009, says Kory Lundberg, a spokesman. In 2005 Wal-Mart opened two stores as laboratories for some 50 energy-saving technologies, including solar and wind power, biofuel heating systems, recycled building materials and waterless urinals. Concepts that tested well were used to help create three high-efficiency stores. These HE.1 stores are 20 percent more energy-efficient than any Wal-Mart Supercenter previously considered efficient.

The company realizes profit from the program after two years, on average, Lundberg says. The HE.2 stores combine technology used in the first-generation stores with new technology that cuts refrigerant usage by 90 percent. The refrigerators will use a system that takes air and water from the heating/cooling systems rather than relying on refrigerant. Leslie Dach, Wal-Mart's executive vice president of corporate affairs and government relations, said at the National Retail Federation's annual convention, “We will continue to find new ways to build stores that have a reduced impact on the environment, save us money and ultimately reach a day when every new store is 25 to 30 percent more energy-efficient than it was in 2005.” tail Federation.

Macy's to shutter nine more stores

Macy's says it will close nine of its 850 stores in the coming months. None of these marked stores belong to the group of 80 duplicate mall anchors resulting from the retailer's 2005 purchase of May Department Stores Co. They are Macy's stores that have suffered declining sales in the face of years of shifting demographics and competitive pressures, sources say. The unit at Macerich's Valley View Center, Dallas, for instance, is no longer in step with the trade area's lower-income demographics, says Tim Spreck, first vice president and regional manager at Marcus & Millichap's Dallas office. “Valley View has found its niche, and the tenancy has swung to serving a lower-socioeconomic clientele, but it has affected the Macy's store there,” he said. Macy's has probably decided to focus on its store at the nearby, more upscale Dallas Galleria, he says, which recently underwent a major expansion. Among the other closures are one more in Texas and three in Ohio, as well as stores in Indianapolis, in Oklahoma City, in Lake Charles, La., and in Riverdale, Utah.

Talbots retrenches

Talbots is pulling the plug on its Talbots Kids and Talbots Mens concepts. The beleaguered chain plans to close 78 U.S. stores by the end of the first quarter, including 66 Talbots Kids and 12 Talbots Mens stores. “By exiting these concepts, we can focus exclusively on our company's core strength — the age-35-plus female market, where we believe there is significant opportunity for profitable growth in both our Talbots and J. Jill brands,” said President and CEO Trudy F. Sullivan in a press release. The retailer's comparable-store sales fell 8 percent in its most recent quarter.

Urban Outfitters grows garden chain

Urban Outfitters has developed a green thumb. The retailer, which also operates the Anthropologie and Free People chains, is branching into gardening and outdoor products. Urban Outfitters bought J. Franklin Styer Nurseries, one of Philadelphia's most famous gardening centers. The acquisition will form the backbone of Urban Outfitters' newest concept, a garden-themed chain to provide landscaping services and sell gardening supplies. The new chain of garden centers will be called Terrain at Styer. In a press release, Urban Outfitters describes Terrain as aiming “to transform the local garden center into an experience that celebrates the beauty and abundance of nature while offering an eclectic mix of garden-inspired products tailored for the contemporary customer.” Styer Nurseries will officially become Terrain at Styer, but Urban did not say how many of the units it plans to open. Styer Nurseries sits on 10 acres across from a lifestyle center called Shops at Brinton Lake. The U.S. market for plants and garden equipment is about $34 billion, according to the National Gardening Association. Urban Outfitters might be overreaching with this foray, says C. Britt Beemer, chairman and founder of America's Research Group. “This is one of those things where one plus one does not necessarily equal two,” Beemer said. “If a company gets into so many retail categories that are so different, there's no synergy, and the buyers are different, so you can't cross-market to them.”

NRDC buys Fortunoff

NRDC Equity Partners announced that it would buy ailing home and jewelry retailer Fortunoff from a group of investment firms for $100 million. This would be NRDC's third retail acquisition. Fortunoff has declared bankruptcy, with $300 million in debt against $268 million in assets. NRDC will provide Fortunoff with a $10 million line of credit to keep the chain's 21 stores open. Besides its flagship on 57th Street in New York City, the jewel chain operates stores elsewhere in New York and in New Jersey, Connecticut and Pennsylvania. NRDC also said it plans to sell Fortunoff merchandise at Lord & Taylor stores to capitalize on the comparable demographics and price points and to reduce operating costs. Despite Fortunoff's history in its geographical area, profit comes down to experience and value these days, says Robert L. Passikoff, CEO of New York City–based Brand Keys. “If [NRDC] is looking at it only from the demographic perspective, well, you don't want to do that anymore,” he said. “It's all about the experience today.”