Sears, Roebuck & Co. (Hoffman Estates, Ill.) is planning to announce today that it is putting its huge credit card operation up for sale, executives close to the company said.
Sears hopes the sale of the credit operations will raise as much as $7 billion in cash, slightly more than the current market value of the entire company. About 60 million Americans hold Sears credit cards, and the business provides 55 percent of the company's annual profits, or about $1.5 billion — far more than at any other retailer.
Sears' Credit and Financial Products business manages the eighth-largest credit card portfolio in the U.S., with $30.8 billion in card receivables at year-end 2002, representing approximately 25 million active accounts. But it has been struggling for some time. The unit's former president, Kevin Keleghan, was fired and then filed a lawsuit in January, accusing the company of defamation and breach of contract. He charges that Sears ceo Alan Lacy defamed him by contending that he withheld information and otherwise “wasn't forthcoming” about problems at the credit division.
In October 2002, Sears announced it would have to allot an additional $222 million to cover unpaid credit card debts in the third quarter — in large part because of its gold MasterCard business, which it introduced three years ago after some of its traditional cardholders had been picked up by other MasterCard and Visa issuers. The card offered check writing and a chance to transfer existing balances to the MasterCard.
The planned sale comes at a time when Sears is battling with discount competitors like Wal-Mart, Target and Kohl's. It is about halfway through a revamping of its stores to make them more appealing to its traditional customers who in the past have bought its refrigerators, ranges, TVs and other high-priced products. Sears is also in the midst of rolling out the products of Lands' End, which it acquired last May for $1.9 billion.
Sears has hired Goldman, Sachs to find buyers, according to The New York Times.