Chicago - Five months after putting its credit business on the block, Sears found a buyer in Citigroup, which paid $3 billion in cash for the portfolio.
Under terms of the deal, Sears will also get back about $3 billion in invested capital, and will receive some $200 million a year for 10 years as part of a long-term marketing and servicing pact with Citigroup.
Sears also expects to save an additional $200 million a year as Citigroup absorbs the costs of the retailer’s zero-percent financing program.
Citigroup will continue to market Sears’ proprietary credit card and its Sears MasterCard, and will also retain most of the credit division’s 8,300 employees.
'This is a great deal for Sears, its customers and shareholders,' said chairman/CEO Alan Lacy. 'Our customers will enjoy broader credit and financial products opportunities and continued high levels of service, while Sears gains an additional source of profitability and greater financial flexibility.'
Lacy added that deal would allow Sears to 'completely focus on growing our core retail and related services business, further simplifying our organization.'
The move follows criticism from analysts and shareholders who charged that the unwieldy credit operation — the nation’s eighth largest with 59 million accounts —muddied the company’s true valuation and distracted Sears from its retail business, while bad debt and delinquencies were hurting earnings.
Nonetheless, some 60 percent of Sears’ total profits are derived from its credit business, and retail sales of big-ticket items could be impacted by the higher qualifications Citigroup is expected to impose on credit applications.
But Tina Settecase, VP/general manager of Sears’ core major appliance business, dismissed those concerns in a recent interview with TWICE. 'Appliance won’t suffer as a result of the sale,' she said. 'Alan [Lacy] knows how important credit is to the category. He will make sure we have a relationship with the new owner that will provide customers with terms that are the same if not better than before.'