More recently, in April, Mindy Meads, who hailed from Lands’ End, took the helm of apparel, succeeding Kathryn Bufano as executive vice president of softlines.
In 2002, Sears’ retail operations produced sales of $35.7 billion, which made for operating income of $1.16 billion.
Fitch kept its credit rating on Sears at “BBB-plus” with a negative outlook. “They’re obviously in the middle of trying to turn around their full-line stores,” said Zahn. “They’ve made some progress. They have more to do. That’s the task at hand in what is still a tough retail environment.”
Sears will benefit from the deal by paying down its debt, which was mostly related to the credit card business anyway, and by making the company easier to understand, but will also lose a “fairly profitable business,” he said. “In our view, it’s kind of a wash.”
On the other hand, Standard & Poor has cut its corporate credit rating on Sears to “BBB” from “BBB-plus” and removed the firm from its previous status of CreditWatch with negative implications.
“The downgrade reflects the absence of this historically important foundation to the credit rating and its operating income…and a greater reliance on a retailing business that has a very challenging future,” said debt analyst Gerald Hirschberg in a statement.
“The rating continues to reflect significant challenges for the retail business, where revenue growth and cost control will remain key issues,” he added. “Moreover, a struggling economy, an intensely competitive retail environment, and lagging consumer confidence will make improvements in the retail business difficult to achieve.”
Additionally, Citigroup and Sears entered into a long-term strategic alliance, under which Citigroup will provide credit and customer service benefits to Sears’ proprietary and Gold MasterCard holders. Sears expects to receive roughly $200 million in annual performance payments from Citigroup based on items such as new account and credit sales generation. Also, Sears is looking for the deal to produce savings of more than $200 million as Citigroup will absorb costs associated with its 0 percent financing program.