ears, Roebuck & Co. announced plans in late March 2003 to sell its behemoth, revenue-draining credit card business and will focus efforts solely on the retail side.

After struggling for 19 straight months with slumping in-store sales and falling earnings in its credit unit, in part because of increasing consumer account delinquencies, the 117-year-old retailer said it will sell its massive credit card operation.

The company also will eliminate an unspecified number of jobs from its Chicago-area headquarters, which employs more than 6,000 people, over the next few months.

The credit card division, which includes both its proprietary cards and co-branded Gold MasterCards, is the eighth-largest credit card operation in the U.S., with $30.8 billion in receivables and 25 million active accounts in 2002; MasterCard receivables make up roughly 40% of the Sears portfolio.

In 2002, credit cards accounted for $1.5 billion, or 60%, of the company's operating income. But the credit card business has gone from a profit generator for the company to a financial liability. By the end of last year, the unit carried approximately $28 billion in debt.

Even though Sears is the third-largest issuer of MasterCards, it is losing market share to other credit card brands used in its stores by shoppers. Sears' credit operation has been plagued by problems over the last several years and has taken attention away from its core retail business. Serious problems with uncollectible debt and a high delinquency rate, in part because of the ailing economy, continued to emerge last year.

In October, Sears announced to investors it would have to allot an additional $222 million to cover unpaid credit card debts. Despite increasing reserves for bad debt, however, 2003 Q1 reports show an 11% drop in income for the credit division.

While Sears hopes to generate between $6 billion and $7 billion from the sale, some analysts said the sale probably will amount to half that. The sale also could boost the value of its stock, which has dropped significantly this year.

Credit card portfolios usually sell for 5% to 20% above their overall receivables. That would equate to a pretax sale price of between $5.3 billion and $10 billion for the Sears portfolio, which stands at $30.8 billion, with the $28 billion in debt subtracted out of that.

Sears has tried over the last several years to reposition itself in order to compete with retailers such as Target, Wal-Mart, Home Depot and JCPenney.

While upgrading merchandise lines and cutting costs have been part of the company's strategy, revenue at stores open at least one year fell 9.4% in February 2003 compared to the same month last year. The company's first-quarter 2003 profits, reported in mid-April, indicated a 75% hike in earnings of $192 million over the same period last year. However, these figures reflect an accounting change and one-time items totaling $190 million a year ago.

The credit unit sale will be one of the biggest changes in the company's 117-year history. Sears has offered its proprietary store cards for 91 years. It also is one the few retailers left that still controls its own credit card operations.

Others have co-branded with third-party financial institutions; those operations account for a much smaller proportion of those stores' earnings, however.

Analysts consider the Sears unit to be a good growth opportunity from a consolidation standpoint. Possible buyers include Citigroup, the largest issuer of credit cards; GE Capital, which owns the largest portfolio of retailer-based cards; and HSBC Holdings Plc, which is in the process of buying Household International, Inc.

All three companies already have substantial private-label portfolios and the necessary capital to make the acquisition.

There is also speculation that Sears and Kmart are planning a merger; Sears would either merge with Kmart or partially or totally purchase it outright. Investor Edward Lampert has big stakes in both companies: He is the second-largest shareholder in Sears and will be the largest Kmart shareholder when the retailer emerges from Chapter 11 status at the end of April.