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Sears seeking to get out of pest control business

The retailer has its biggest concentration of contracts in Florida.


© St. Petersburg Times, published January 5, 2001

Sears, Roebuck and Co., which owns the nation's third-largest termite and pest control service, wants to get out of the business.

The retail giant on Thursday said it will take a $115-million pre-tax charge against fiscal 2000 earnings for losses run up by its Orlando termite and pest control operation. The Hoffman Estates, Ill., parent company also said it is "evaluating strategic options," and company officials confirm that means Sears hopes to sell the business.

Sears has termite and pest control contracts in 250,000 homes in 10 states in the Southeast, with the biggest concentration in Florida.

In January 1997, Sears bought All American Termite and Pest Control, an Orlando company that had been selling pest control services under the Sears brand for several years through a license agreement. The purchase by Sears was part of a broader plan to become a force in the home improvement services business. But Alan Lacy, Sears' new chairman and chief executive, began extracting the company from many of the programs after he took charge a few months ago.

"We thought pest control would be a growing and profitable business," said Sears spokesman Ted McDougal. "It has not been. It is not our core retail business."

Sears was unable to increase revenues in the business through all of 2000. Sears did not disclose what it paid for All American. But much of the $115-million charge against earnings is for goodwill, a sign the retailer overpaid for a business that in 1997 generated annual revenues of about $100-million.

Analysts were not surprised.

"Pest control is a tough business that requires you put your reputation on the line every time you go into someone's home," said Kurt Barnard, a consultant and Upper Montclair, N.J., publisher of Barnard's Retail Trend Report. "It's a tough extension of business for a retailer."

Sears promises an orderly transition.

"We will stand behind our service and take care of our pest control customers," said spokesman Tom Nicholson.

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