Sears considering sale of credit card division; 25 million active accounts
Wednesday, March 26th 2003, 12:00 am
By: News On 6
CHICAGO (AP) _ Sears, Roebuck and Co. said Wednesday it is considering selling its credit card division, considered one of the top customer databases in the retail industry with about 25 million active accounts.
The division was once a major earner for Sears _ in 2002, it accounted for roughly 60 percent of the retailer's net income _ but a number of cardholders who have not been paying their bills has become a growing problem.
The recent credit division difficulties, combined with confusion over the company's business strategy, drove Sears' stock price down by nearly two thirds from a high of $60 last year. After news of a possible sale of the credit division, Sears shares shot up $2.60 to $24.05 in morning trading Wednesday on the New York Stock Exchange.
Sears CEO Alan Lacy said Wednesday he believes the value of the credit operation is ``not reflected in today's market valuation of Sears.''
Selling the operation would assist the company's cost-cutting attempts after 18 months of slow sales. Sears on Tuesday also announced a pending round of layoffs at its corporate headquarters.
``It's a bold move to re-establish themselves as a nationwide retailer,'' said Jordan Kaplan, professor of managerial science at Long Island University. ``It would give Sears an opportunity to focus on their core business.''
The downside, he said, is the loss of such a large portion of its revenue. Selling the operation also would mean the loss of a major marketing tool for Sears.
Likely bidders for Sears' credit operation include major credit card issues such as Citigroup Inc., Bank One Corp. and Bank of America Corp., The Wall Street Journal reported in Wednesday editions. Both The Wall Street Journal and the Chicago Tribune, citing unidentified sources, said Sears had already decided to sell.
The Chicago Tribune said sources estimated the company could get as much as $6 billion to $7 billion for the credit card operation _ roughly the current market value of the entire company.