Credit Suisse: Lands’ End Spinoff Hurts Sears

Not everyone is thrilled that Sears (SHLD) plans to spin off its Lands' End business.

The stock hasn't moved much, falling 0.8% to trade at $50.25 in afternoon market action.

But Credit Suisse analysts Gary Balter, Simeon Gutman and Andrew Kinder argue that the move hurts the value of Sears and shows that the retailer was unable to find a buyer for the asset.

In a note published Friday, the Credit Suisse trio writes:

Lands’ End's numbers are surprisingly weak, with EBITDA having declined by 50% in a two-year period; a period where JCP was donating apparel share and one would have expected stronger results from Lands’ End. EBITDA fell from over $200 million in 2010 to $107 million in 2012, well below the performance of what would be viewed as comparable companies in apparel.

That said, Lands' End is probably the most profitable business Sears has left, and its spinoff will add $100 million to the company's EBITDA loss projections. Balter and his colleagues write:

While not clear in the filing, we assume that Lands’ End will take on some debt in their capital structure and possibly pay a dividend back to the parent. However, given the valuation of the total company, we believe losing this EBITDA will be much more material to the parent than any dividend.