Sears Holding Corp. (SHLD), the unprofitable department-store chain seeking fresh ways to raise money, will lease space to Primark Stores Ltd., a British budget-clothing retailer that’s expanding in the U.S.
Primark will set up shop in seven Sears stores in the Northeast, according to a statement today. Separately, Hoffman Estates, Illinois-based Sears announced a rights offering that could generate as much as $625 million for general corporate purposes.
“Sears Holdings is strategically transforming one of the largest retail real estate portfolios in the United States over time while continuing to operate its existing stores in large, but rationalized selling space,” Jeff Stollenwerck, president of real estate for Sears, said in the statement.
Edward Lampert, Sears’s chief executive officer and its biggest investor, is squeezing more cash out of the company following nine straight quarters of losses. His recent transactions include a $500 million dividend from the spinoff of the Lands’ End clothing unit and a rights offering for most of the stake in Sears’s Canadian division.
The offering announced today consists of 8 percent senior unsecured notes due 2019 and warrants to purchase shares of common stock. Sears lost $975 million in the first half of its fiscal year. That follows a combined $2.3 billion in losses in the past two fiscal years.
Sears shares rose 5.1 percent to $29.85 at 9:56 a.m. in New York. The stock had dropped 28 percent this year through the end of last week.
At six of the seven locations in today’s real estate deal, Sears will continue to operate alongside Primark. At the seventh site — located at the King of Prussia Mall in Pennsylvania — Sears will close down. Primark will then share that space with another Sears subtenant, Dick’s Sporting Goods (DKS) Inc., which signed an agreement for part of the second floor in January.
Primark, owned by Associated British Foods Plc (ABF), will lease a total of about 520,000 square feet (48,310 square meters) from Sears. The British retailer will take over the space in the next 12 to 18 months as it continues to push beyond its home market.
Primark, one of Europe’s fastest-growing clothing chains, has said it was planning to add stores in the Northeastern U.S., the first of which is slated to open at the end of next year.
Primark stores are known as traffic drivers, said Matt McGinley, managing director at New York-based International Strategy & Investment Group, which has a sell rating on Sears’s stock
“That could help the Sears stores,” McGinley said.