Will Lands' End Land a Buyer?


After nearly 40 years at the helm, Lands' End Chairman Gary Comer seems to be shopping around the casual-wear catalog he founded. Sears, Roebuck & Co. looked into acquiring it last fall, according to sources close to the situation, but hasn't made an offer. Neither has Wal-Mart Stores or May Department Stores, which, the sources say, also had a look last year.

While none of the companies would confirm discussions, Comer, 73, appears to be looking for an exit strategy. Why no one wants to go beyond a first date isn't as apparent. Lands' End has a well-respected and profitable e-commerce operation, where sales rose 58%, to $218 million, last year. But slowing prospects for e-retail may have dimmed its appeal.

Or Comer, who controls 55%, may want too high a price: Sources say he's looking for $50 to $70 a share. (Lands' End shares currently trade around $34, the same level as three years ago, even though last year's earnings fell 28% on overall sales of $1.46 billion.)

EXECS DEFECT. Meantime, there's some internal turmoil. Five Lands' End execs and four board members have left in the past year, indicating disagreement over the company's direction. But CEO David Dyer denies deeper problems: "Change is something you have to go through."

Sears looked at acquiring Lands' End for several reasons, industry sources say. The nation's No. 2 retailer doesn't sell apparel over the Internet, except for school uniforms. Purchasing Lands' End would give Sears the expertise and shipping infrastructure to broaden it's online clothing offerings. That also would help Sears compete against rival J.C. Penney, one of the largest apparel retailers on the Net.

Sears also was interested in the Lands' End clothing brand to sell in its stores and on the Net, the same sources say. The big retailer has struggled with its apparel offering, which lacks appeal to shoppers. The Lands' End brand has more credibility and a reputation for quality that would mesh with Sears' image. Moreover, Lands' End clothing appeals to people with higher incomes than those who shop Sears.

COST-EFFECTIVE. Finally, Sears was interested in Lands' End's expertise in sourcing its apparel production with garment manufacturers worldwide. Lands' End is renowned for its ability to produce well-designed garments while keeping costs down.

Why no sale to Sears? One reason the deal may have stalled could be the change in leadership at Sears last September, when Alan Lacy was named to replace Arthur Martinez as CEO. The talks between the two companies, sources say, started under Martinez, who knows Comer. But Lacy may not have wanted to carry through on a move made by his predecessor as he formulated his own strategy.

Comer was interested in Sears as an acquirer because it would keep Dodgeville (Wis.) Lands' End as a Midwest company, these same sources say. In 1998, they add, Lands' End and specialty retailer Nordstrom held talks, but they went nowhere. Still, now that Lands' End is in play, sources knowledgeable about the catalog industry say, it wouldn't be surprising to see Lands' End acquired by a company outside the U.S.

SHOPPING SPREE. One likely candidate is German mail-order powerhouse Otto Versand, which has already bought two Midwest properties. Otto, the world's largest catalog company, acquired Spiegel in Downers Grove, Ill., in the early 1980s. Later that decade, Spiegel bought Redmond (Wash.) Eddie Bauer, whose merchandise is similar to Lands' End's. In 1998, Otto also snapped up Crate & Barrel, a Northbrook (Ill.) home-furnishings retailer and cataloger.

Under Otto's leadership, Eddie Bauer has become an international retailer and mail-order company with operations in Japan, Germany, and England. Those three markets are Lands' End's largest abroad, which could provide further synergies should Otto buy the company.

With U.S. retail stocks struggling due to the slow economy, a big foreign player such as Otto might also be one of the few companies that could afford Lands' End right now. As with other companies it has bought, Otto would likely keep Lands' End as a separate subsidiary.

But even if Otto doesn't step forward, another buyer certainly will. Comer clearly wants to cash in on the company he created. By Robert Berner in Chicago


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