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3/27/2003

Sears may get rid of its credit card division

The Associated Press

CHICAGO — Sears, Roebuck and Co. said Wednesday it is considering selling its credit card division, considered one of the top customer databases in the retail industry with about 25 million active accounts.

The division was once a major earner for Sears — in 2002, it accounted for roughly 60 percent of the retailer’s net income — but a number of cardholders who have not been paying their bills has become a growing problem.

The recent credit division difficulties, combined with confusion over the company’s business strategy, drove Sears’ stock price down by nearly two thirds from a high of $60 last year. After news of a possible sale of the credit division, shares shot up $2.60 to $24.05 in morning trading Wednesday on the New York Stock Exchange.

Sears CEO Alan Lacy said Wednesday he believes the value of the credit operation is “not reflected in today’s market valuation of Sears.”

Selling the operation would assist the company’s cost-cutting attempts after 18 months of slow sales. Sears on Tuesday also announced a pending round of layoffs at its corporate headquarters.

“It’s a bold move to re-establish themselves as a nationwide retailer,” said Jordan Kaplan, professor of managerial science at Long Island University. “It would give Sears an opportunity to focus on their core business.”

The downside, he said, is the loss of such a large portion of its revenue. Selling also would mean the loss of a marketing tool.