Tomahawk, WI 04/09/2014 (Basicsmedia) – Is the tenth largest retailer in the U.S. going to return to profitability soon? As Sears Holdings Corp (NASDAQ:SHLD) spins off its Lands’ End Inc. (NASDAQ:LE) subsidiary as a separate entity, investors gave initial thumbs down to both the stocks.

The Anatomy of a Retailer

The retail business has been far from calm in recent years. While the retail business has always been like a choppy sea and retail businesses have always had to be skilful sailors to survive the choppy seas, new challenges have come to the fore for all retailers.

For old-world retailers like Sears, the challenges include retailing behemoths like Wal-Mart Stores, Inc. (NYSE:WMT) on one hand and online retail giants such as Amazon.com, Inc. (NASDAQ:AMZN) on the other. While the Amazon stock has always traded at very high values and the stock has seen price increases of upwards of 300% and nearly 600% in the last five and 10 years respectively, shares in Sears have declined by 32 and 16% during the same period.

Sears has been losing its luster for quite a few years now and has closed numerous Sears and Kmart stores in 2011 and 2012. Spinning off Lands’ End as a separate entity is a way to unlock value for Sears. Lands’ End, however, got a market valuation of about $1 billion which is less than the $1.9 billion Sears paid to acquire it back in 2002. The share of Sears’ sales contributed by Lands’ End is not very large — $1.6 billion out of $36 billion. Hence, the current market capitalization of Lands’ End that is roughly 20% that of Sears shows that the spin off was the right thing to do.

Also, Sears received $500 million from a cash dividend paid by Lands’ End.

Sears’ Future

With continuous losses in the last few years and spinning off of one subsidiary after another, Sears itself appears to be losing value for investors. Can the losing trend for Sears — the company reported a loss of $5.4 billion in the last three years including $1.4 billion in 2013 — be reversed? That is the $36 billion question with few clear answers. The only thing that is clear is that the future of retail lies online. There is very little that consumers won’t purchase online — clothing, shoes, flat screen TVs — if they can get a better deal at Amazon.com.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.