Sears to exit S&P 500; shares slip
NEW YORK (AP) — Sears, a fixture in the Standard & Poor's 500 index for decades, will exit that club next week, but the company's shares are already feeling a loss of prestige, dropping 5 percent in premarket trading Thursday.
The S&P said Wednesday that Sears' public float has been well below the 50 percent threshold for inclusion on the index for a long time and is no longer considered representative of the index. A float refers to shares that are public and available for investors to trade. ESL Investments, run by billionaire investor Eddie Lampert, owns a majority of Sears' outstanding shares.
Because companies on the S&P 500 are the most widely held stocks in the country, they are considered a bellwether. But Sears and other traditional retailers like J.C. Penney Co. have struggled in recent years.
The expulsion from the S&P means that some indexed funds automatically drop Sears "SHLD" ticker from its must-have list.
Shares tumbled $2.75 to $54.70 in premarket trading.
Sears has been a member of the S&P since the mid-1950s. And it is now a very different company that it was, even five years ago.
Sears, Roebuck & Co. was acquired in 2005 by Kmart Holding, and became the Sears Holdings Corp.
The retailer has embarked on an aggressive cost-cutting plan, reduced inventory, sold off some assets and spun off others to bolster its results as it faces falling sales and tough competition. It reported a loss in its most recent quarter as revenue fell 7 percent.
Still, it's one of the best performers on the S&P this year. Through the end of trading Wednesday, shares have risen more than 80 percent, a fact that Sears readily points out.
"While we're disappointed in Standard &Poor's decision, we would point out that the action is rules based and solely a function of the public float of our shares, and not the valuation or performance of the company," said spokesman Chris Brathwaite. "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 our financial and operational discipline."