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Sears Is Selling Its Credit Card Unit

March 27, 2003|From Reuters

Sears, Roebuck & Co., the largest U.S. department store chain, said Wednesday that it has put its $30-billion credit card portfolio up for sale so it can focus on its retail business. The news sent its shares up 13%.

Sears, based in Hoffman Estates, Ill., said it was exploring alternatives, including seeking buyers for the credit card portfolio, and expects to complete the review in the second half of the year.

Getting rid of the credit unit would put the spotlight back on its department stores, for better or worse. Sears has posted 18 straight months of declining sales at stores open at least a year -- a key measure known as same-store sales.

The credit card business, which has about 25 million active accounts and represents slightly less than two-thirds of Sears' overall profit, has led to problems for the company because of rising delinquencies.

Chief Executive Alan Lacy said the company believes finding the "right strategic partner" for the credit card business would boost Sears' stock price.

Sears shares rose $2.69 to $24.14, and were the most active issue and the second-biggest net gainer on the New York Stock Exchange. Its shares have been among the weakest in the retail sector, partly because of credit card concerns.

Lacy said he had looked at selling the credit card unit three other times in the eight years he has been with Sears, but now was the right time because the value of the business is high and the retail operations are "viable, profitable and healthy."

The credit card accounts include both the Sears' store card and the Sears Gold MasterCard. Sears started issuing the branded MasterCard a few years ago after its stores began accepting other cards such as Visa and MasterCard and use of its proprietary credit card fell.

The higher credit limits offered on the Gold MasterCard alarmed many analysts who worried that customers bogged down with home refinancing or car loans would have trouble paying bills in a soft economy.

Wall Street's concerns intensified in October when Sears fired the head of its credit card division shortly before the retailer was forced to put aside an additional $222 million to cover bad accounts in the portfolio.

Sears has been trying to turn around slumping retail sales, improving store signage and adding conveniences such as shopping carts. It also is rolling out merchandise from newly acquired Lands' End in hundreds of its stores in hopes of boosting clothing sales.

The retailer faces fierce competition from department stores and some discounters, which have been luring customers with a wider selection of trendy clothing.

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