NEW YORK (TheStreet) -- Like little Napoleons, U.S. retail giants have ambitions to conquer their colder northern neighbor. And, just like the diminutive imperialist, they're finding the task fraught with peril.
Sears Holding Corporation (SHLD) conceded defeat today. In a press release, the company announced it is exploring "strategic alternatives" for its 51% interest in Sears Canada, including selling the entire stake outright. The news comes seven months after Sears Canada sold five of its largest urban stores, including its flagship Toronto store, back to the landlords for $400 million.
Sears shares rose early Wednesday on hopes that the company would make more from the sale than it does from the stores. As of 11:15 a.m., shares were trading just over $44, up 1.9% over Tuesday's close. Still, year to date Sears stock is down over 8%.
On StockTwits.com, opinion on the news was decidedly bearish. Many investors said that they couldn't fathom a competing retailer wanting to purchase Sears' struggling stores for enough money to boost Sears' valuation. And they added that the news undermined Sears' turnaround story, since it had been unable to fix its Canadian operations as initially planned.
$SHLD Sears Canada divestment is not positive, company repeatedly denied it in past. sears canada results have been consolidated thus far? neil patel (@stockbuzzard) May. 14 at 08:06 AM
Sears' Canadian business has struggled for the past decade and declined significantly last fiscal quarter. Sears Canada's comparable-store sales dropped 2.7% during fiscal 2013, which ended on Feb. 1. The sales drop accounted for an $85 million decline.
In addition, Sears Canada lost another $150 million from a new licensing arrangement for home improvement product services and $70 million due to the closure of four stores in Canada. Sears Canada's gross margin rate declined 190 basis points, a fact which management attributed to increases in inventory reserve requirements.
The company has 449 full-line and specialty stores in Canada, according to its latest 10-K, filed in February. It also has 1,980 stores in the U.S., operating under the Kmart and Sears brands.