Sears' Nifty Purchase: Footstar Footwear

Includes: FTAR, SHLD
by: Todd Sullivan
Footstar Inc. (OTC:FTAR) is selling its footwear license to Sears Holdings (NASDAQ:SHLD) for $13 million in preparation for winding down its business at the end of the year. Footstar agreed to sell substantially all of its intellectual property to Sears, including the intellectual property related to Sears’ Kmart business.

Footstar operates roughly 1,300 licensed footwear departments at Kmart under a contract set to expire at the end of 2008. They also operate licensed footwear departments in 859 Rite Aid Corporation stores located on the West Coast. Brands under Footstar’s operations include Thom McAn, Cobbie Cuddlers and Texas Steer — which are company owned — and Route 66 and Basic Editions. Kmart-licensed footwear departments account for substantially all of its $630 million in sales and $53 million operating profit. Kmart has begun to hire several employees from Footstar and has promised employment to almost all current management.

So, for $13 million Lampert has saved Sears essentially $53 million annually (the profits Footstar received from Kmart). Not a bad return....

Disclosure: Long SHLD.