Sears, Roebuck and Co. has decided to sell its National Tire & Battery (NTB) chain as part of a move to generate up to $500 million in cash, according to individuals familiar with the matter.
Besides the 225-outlet NTB chain, Sears also would like to sell its Orchard Supply Hardware unit, according to the sources.
The steps come as Chairman and CEO Alan Lacy attempts to shore up the company's balance sheet and free up resources needed for his plan to launch strip-center superstores.
Sears has hired New York-based Citigroup Inc. to seek buyers for NTB and New York-based Merrill Lynch & Co. to handle Orchard Supply, according to an investment banker familiar with the matter.
Sears told Tire Business it would neither confirm nor deny the pending sale, saying it would not comment on market speculation.
Both chains are holdovers of a failed effort by Mr. Lacy's predecessor, Arthur Martinez, to create new sources of growth through a series of ``off-the-mall'' specialty retailers. Sears created NTB in 1997, combining its Tire America and National Tire Warehouse chains. It bought Orchard Supply in 1996 for $305 million.
NTB, with estimated annual sales of $400 million, might generate a sale price of $100 million, industry experts say. The chain's history of losses and slumping same-store sales (down 4.1 percent in 2002 and an additional 4.8 percent in the first quarter of 2003) will make it a tough sell, as Sears has learned in sporadic previous attempts to sell the retailer. Analysts said an investment group is perhaps the most likely acquirer.
Sears owns 89 of the 225 NTB outlets and leases the other 136. The company has made no secret of its desire to find a vehicle to expand beyond its 870 full-line department stores, located primarily in shopping malls.
Ditching NTB and Orchard Park would continue a pruning process that began with Sears' late 1990s divestitures of its Western Auto Supply stores and the now-defunct HomeLife furniture store chain.
``It gets down to trying to do something outside of your core expertise,'' said Philip Zahn, a retail analyst in Chicago at New York-based credit rating agency Fitch Inc. ``Department stores and the credit business are what they've done historically. The other (retail formats) have completely different business dynamics.''
After peaking at more than 330 stores in 1998, Sears has pared the NTB chain down to 225 primarily in two series of closings-53 ``underperforming'' stores in 35 metro areas in 2001 and 33 outlets in three states in 1999. During 2002, Sears took a charge of $208 million against earnings to cover the cumulative effect of the change in accounting for goodwill during the year, reflecting goodwill impairment for NTB and Orchard Supply.