Sears Holdings Corp (NASDAQ: SHLD) is flying early on in the market this morning, and for good reason. The company announced that it relationship with Citi surrounding the Sears Mastercard will be extended beyond the 15-year term. Along with the extension will come immediate funding for Sears, leading to excitement among investors and sending the stock toward the top. Today, we’ll talk about:
- The extended agreement;
- what we’re seeing from SHLD as a result;
- and what we’ll be watching for ahead.
SHLD Announces Extension Of Agreement With C
As mentioned above, Sears Holdings is having an incredibly strong start to the trading session this morning after announcing the extension of an agreement. In a press release issued early this morning, the company announced the long-term extension of its 15-year co-brand and private label relationship with Citi, as well as long term marketing arrangements that include the Shop Your Way® Mastercard rewards program. Moving forward, cardholders that have the Shop Your Way Mastercard will enjoy benefits that used to only be available on a promotional basis. These include 5% back on eligible purchases made at gas stations, 3% back on eligible purchases made at grocery stores and restaurants, 2% back in points on eligible purchases at Sears and Kmart, and 1% back on all other purchases.
In the release, SHLD announced that the extension of the agreement comes with a hefty payment. In fact, Citi will pay the company $425 million upon entry into the agreement, $400 million of which has already been received. In a statement, Craig Vallorano, Head of Citi Retail Services, had the following to offer:
We are pleased to extend our long-standing, successful relationship with Sears. The extension provides for strong long-term economic value for both Citi and Sears, and we are especially proud to provide enhanced benefits to our Shop Your Way Mastercard cardmembers every day, at the places they shop most… Consistent with other top-of-wallet credit cards, more than 70% of customer spend on our Citi-Sears general purpose cards occurs at merchants beyond Sears, so this enhanced rewards structure is designed to deliver strong value for Shop Your Way card customers as well.
The above statement was followed up by Edward S. Lampert, Chairman and CEO at SHLD. Here’s what he had to offer:
We’re extremely proud of our longstanding relationship with Citi and are excited that this best-in-class offer which rewards Shop Your Way members for activity in their daily lives is now an ongoing part of the value proposition for cardholders… The Shop Your Way Mastercard is a cornerstone of the Shop Your Way engagement platform which provides generous rewards, partnerships and experiences. We saw a strong volume of card issuances in 2017 and we look forward to building on that momentum as the power of the Shop Your Way platform allows us to personalize experiences and make life easier and more rewarding for every cardholder.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news moves the market. In this particular case, the news proved to be overwhelmingly positive. After all, the Shop Your Way Mastercard not only drives further business for Sears Holdings, but the agreement leads to $425 million in funding. So, it’s no surprise that excited investors are sending the stock screaming for the top. At the moment (9:35), SHLD is trading at $3.90 per share after a gain of $0.31 per share or 8.61% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on SHLD. In particular, we’re interested in following the story surrounding the company’s relationship with Citi as well as the use of the funds generated through this relationship. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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