Sears Announces Plans To Exit The S&P 500 As Shares Fall
Sears Holdings Corporation (NASDAQ:SHLD) is one of the most well known, and long standing members of the S&P 500, and they have created quite a stir with their announcement of plans to exit the index. The company’s stock has already shown signs of mistrust in the move and had dropped 5% in pre market trading on Thursday.
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The S&P released a statement on Wednesday, saying that Sears Holdings Corporation (NASDAQ:SHLD)’ public float of shares had been less than the 50% thresh hold for quite some time, and since they no longer meet the requirements, they are not considered a member of the index any longer, according to BusinessWeek. The term float refers to the number of shares which are available for trading on the market.
ESL Investments, chaired by Eddie Lampert, is the majority shareholder of Sears Holdings Corporation (NASDAQ:SHLD)’ outstanding shares. Sears Holdings Corporation (NASDAQ:SHLD) has shown signs of struggling in recent years, much like JC Penney and other major retailers, who were once considered the strongest companies to invest in. The S&P 500 Index contains the most widely traded companies in the U.S., and seeing these giants falter is not heartening.
Sears has been in the S&P for more than 50 years, and has been a desirable stock until recently. In the last few years, many major changes have affected the company’s desirability to investors, including its 2005 buyout by K-Mart. The company became known as Sears Holdings after the buyout, and it has indeed struggled of late, to keep up with the changing market trends.
Chris Brathwaite, a spokesman for Sears, said in a statement, the decision is “rules based, and sole a function of the public float of our shares, and not the valuation or performance of our company. We would also highlight that S&P recently boosted Sears Holdings’ credit ratings outlook to stable from negative, saying the company had improved its liquidity through out financial and operational discipline.”
Sears has made some moves towards improving profits, including expanding their line of stores. We reported that the Sears Hometown chain would be spun off to become its own company, separate from Sears Holdings, and this is part of the company’s plan to improve profitability, and increase revenue.
We also reported on how Sears has continually struggled, and that this could be a good marker to judge the retail sector by. Sears has long been one of the most well known names in retail, and to see them struggle in a soft economy, does indeed indicate that changes may be necessary to keep up with the ever changing market.