Crain News Service report
CHICAGO (Nov. 1, 2013) — Sears Holding Corp.'s plan to divest its Sears Auto Center business faces headwinds, according to at least one financial analyst who follows the company.
Gary Balter, a New York-based analyst at Credit Suisse, said the auto centers business "may not be that attractive a property." Many are attached to full-line Sears stores and "more important, there are likely significant environment issues and reparations that may be required in selling off properties that were used to change oils and other car fluids," he wrote in a note to investors.
Sears announced Oct. 29 it would consider separating its Sears Auto Center stores and lucrative Land's End business as it attempts to become "a more focused company that is easier to understand and manage," according to a company statement.
In the end, Mr. Balter wrote, Sears' moves to monetize the properties confirm the long-raised speculation among analysts that Sears CEO Edward Lampert is giving up on the firm's retail operations in favor of selling off its real estate holdings and name-brand assets.
Mr. Balter did not speculate on what value the market might put on the auto center business, which comprises nearly 760 locations across the country. According to its financial filings, the network includes 714 locations integrated into its full-line stores, eight operating out of Sears Essentials/Grand stores and 36 free-standing locations.
The company does not break out sales or earnings for its business units. Tire Business estimates the business generates sales of at least $1.5 billion annually.
Sears has invested heavily in the auto center business of late, launching programs in the past couple of years to refresh the centers' showrooms and upgrade their service capabilities, including installing Hunter Engineering Co.'s Quick Check HawkEye Elite 3D alignment technology in about half of its stores and developing a universal TPMS tool with equipment manufacturer ATEQ Corp.
This report is based on information included in a story by reporter Brigid Sweeney of Crain's Chicago Business on the publication's website on Oct. 30. The magazine is a sister publication of Tire Business.