Defending millions of dollars in executive stock sales in the wake of a planned merger with Kmart Holding Corp., Sears, Roebuck and Co. felt compelled to reassure workers that there is reason for optimism about the retailer's future.
"The actions of associates with options should not be interpreted as a lack of support or confidence in the prospects for the merged company," the Hoffman Estates-based retailer said in a letter to employees on Thursday that was filed Friday with the Securities and Exchange Commission. "Many Sears associates, including senior executives, continue to hold Sears stock beyond their options."
The company, on pace for its fourth-straight year of falling sales, is getting many questions from workers about the merger, spokesman Ted McDougal said Friday.
As a result, Sears has been posting correspondence, including questions and answers it gets from workers during the course of the week, to a company intranet every Thursday.
"We're committed to open communication," McDougal said, adding that Sears is also required to inform the SEC.
Taking advantage of a run-up in Sears' stock, at least eight top executives sold or exercised options for shares since the deal was announced Nov. 17. Sears' chief financial officer, its general counsel and its top personnel executive were among those who had sold $15.7 million in stock, according to figures from Thomson First Call.
In contrast, before the proposed deal, top Sears executives had dumped $2.58 million in stock in 2004.
Since Dec. 1, at least three more top executives, including the heads of public relations and strategy, have cashed in. In the first three weeks after the transaction was proposed, total stock sales have reached about $30 million, the company told the Associated Press.
Sears has pointed out that, as part of the merger, all Sears' stock options will be cashed out at the closing. About 17,000 Sears workers have options, all of which vest before or at the deal's closing.
"Based on their personal financial needs, we expect that many of those associates, including senior executives, may elect to exercise some or all of their options over the period leading up to the closing," Sears said.
The company also addressed a worker's question on why it didn't continue to try to expand away from shopping malls on its own.
The company replied: "The proposed merger dramatically accelerates our off-mall growth. We simply could not grow quickly enough if we built on our own, nor could we be assured of optimum locations that fit our demographics."
Earlier this year, Sears purchased about 50 stores from Kmart and Wal-Mart Stores Inc. in what marked its biggest growth spurt in decades.
But now the merger with Kmart means that hundreds of additional Kmart stores will be converted to the Sears banner.