Sears opts for break-up as Strong quits board

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The Independent Online
Sears signalled the break-up of the ailing retail empire yesterday when it announced plans to demerge the Selfridges department store business while calling in a "company doctor" to oversee the troublesome footwear operation.

The break-up will see the departure of Liam Strong, chief executive, who has been under intense City pressure due to the group's prolonged period of under-performance.

He will leave in June with a year's pay-off expected to be worth around pounds 500,000. Though Sears' shares have under-performed the FT all-share index by nearly 55 per cent during his five years as chief executive, Mr Strong stood by his record yesterday.

"The world may not like where we have got to but we have built value. We've done a lot of good stuff but it has been overshadowed by the shoe business."

Asked about his future plans he said: "I probably won't be going back into the shoe business. I've got a range of options."

Though Sir Bob Reid, chairman, said City and press criticism of Mr Strong had been "too personal and too pointed", others said his departure had become inevitable.

Nick Bubb, a analyst at Mees Pierson, said: "He had a fair amount of bad luck and a fair amount of bad judgement. History will judge where the balance lies."

With the deal to sell the Freemans catalogue business to Littlewoods also agreed yesterday, the break-up marks the end of the Sears conglomerate built up under Sir Charles Clore in the 1950s. Sears will retain its fashion stores which include Miss Selfridge, Warehouse, Wallis and Richards but it is likely that these will be grouped under a new corporate name.

The restructure will see the Freemans mail order business sold to Littlewoods for a net pounds 367.5m subject to approval by the Monopolies and Mergers Commission. This compares to the original price of pounds 395m.

The successful Selfridges department stores business will be demerged into a separate publicly quoted company later this year or early in 1998. Analysts say this could be worth up to pounds 625m.

At the loss-making shoes shops business, which includes Dolcis and Shoe Express, David James has been called in as executive chairman to decide whether sale or closure is the best route forward. He is the "company doctor" whose past rescue projects have included Eagle Trust and LEP Group.

Mr Strong said yesterday that Sears had received three or four offers for each of the formats which include Shoe Express, Dolcis, Shoe City and Cable & Co. It is thought that C&J Clark, the privately owned footwear company, will be interested in some parts of the business.

Other potential buyers include Stylo, the Barrett shoe shops business that acquired the Hush Puppy operation from Sears last year, and Nine West, the US fashion chain. European interest is also expected.

It is possible some parts of British Shoe Corporation could be merged with the fashion business which is being retained. Merging Dolcis with Wallis or Warehouse is one idea thought to be under consideration.

The shake-up could involve large job losses, with the head office and distribution centre in Leicester under threat.

Analysts estimate the value of the Sears break-up to shareholders vary widely from 81p to 110p. The lower proceeds from the Freemans sale means Sears will return pounds 370m to shareholders later this year rather than the pounds 410m planned.

Yesterday's announcement came as Sears reported a collapse in profits from continuing operations from pounds 111m to pounds 81m. The footwear business slumped from a pounds 7.5m profit to a pounds 9m loss. In home shopping, profits at Freemans catalogues fell from pounds 38m to pounds 21.5m while clothing profits were flat.

Selfridges remained the best business, increasing profits from pounds 34.6m to pounds 35.5m.

Comment, page 25

Step by step

out the door

'My vision is to be a very good retailer indeed.'

Liam Strong, chief executive of Sears. 1 May 1995

'We are behind Liam. This year looks like a bloodbath but it is a deck- clearing exercise. This will be a strong group and a real force in retailing.'

Sir Bob Reid, chairman, announcing a plunge from profits of pounds 154m to losses of pounds 120m, 24 April 1996

'I'm not sure the Sears collection of businesses can be turned around by Liam Strong or anyone else. But he will get the blame and no doubt someone else will be trotted out as the next great hope.'

Dissatisfied shareholder, 24 April 1996

'Over the last few years Strong's and Sears' credibility have gradually eroded. We are entering the endgame of the current strategy.'

Retailing analyst, 4 June 1996

'If you fire the chief executive that isn't the end of it. It is only the beginning. We have a very strong executive team and Liam should be able to make this work but Sears has got to show some better return in the next 12 months.'

Sir Bob Reid, 18 January 1997

'Whatever route Liam Strong chooses, you feel there will be a mishap along the way.'

Retailing analyst, 27 March 1997

'I probably won't be going back into the shoe business.'

Liam Strong, asked about his future on leaving Sears, 29 April 1997