The company has accepted that drastic action to deal with the problems at the British Shoe Corporation must be taken if Sears is to win back the confidence of investors.
The company has further concluded that merely demerging Selfridges will not address the fundamental problem of share price underperformance. Although Selfridges could be floated at a healthy premium, this would not be sufficient to offset the drag on the Sears share price which is accounted for by BSC.
Next month the shoe shops will, for the first time, be selling merchandise which has been selected entirely by the new management team which has been installed over the last 18 months.
It will be Sears' first chance to assess whether the changes it has made both to the product range and operational systems will be sufficient to transform the division's financial performance.
It will become clear over the next few months whether the shoe shops have the potential to earn a proper return for shareholders. If the board concludes that an adequate return cannot be earned then it will take radical action to deal with the problem.
Sears is unlikely to find a single buyer for the entire operation, given the parlous state of the market which declined by 5 per cent last year. The shoe division operates under four different facias, including Dolcis and Shoe Express, that could be broken up, but the company recognises that disposal of a substantial number of its shoe shops could be difficult.
Outright closure is also an option but this would prove to be expensive, given that BSC has hundreds of outlets.
A more creative solution for withdrawal or dramatic shrinkage could therefore be constructed. This would attempt to exploit the significant freehold and long leasehold element of the 700 shoe shops BSC operates.
Last week's warning that full year profits would be significantly below the pounds 100m recorded last year was made largely because of poor trading in the shoe shops.
The warning led to calls for the resignation of Liam Strong, Sears' chief executive.