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Sears to spin off or sell holdings; Retailer also plans to cut inventory

Sears Holdings Corp. said Thursday that it's unloading some of its profit-busting stores, but the retailer fell short of revealing how it plans to woo shoppers back into its remaining ones.

Investors have long speculated that the troubled retailer could sell off its massive real estate holdings to generate extra cash. But industry watchers say that will do little to solve Sears' main problem: Rivals have been able to lure customers away from the retail chain because of its drab stores and unexciting merchandise.

Indeed, rivals like Walmart typically spend between $6 and $8 per square foot on things such as updating cash registers, replacing floor tiles and repainting stores, according to research firm International Strategy & Investment Group. But over the past few years, Sears spent on average between $1.50 and $2 per square foot.

As part of a plan to turn around the company, Sears, based in Hoffman Estates, Ill., said Thursday that it will spin off its smaller Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400 million to $500 million.

In a separate deal, Sears will sell 11 stores to the real estate company General Growth Properties for $270 million. The company also said it plans to cut inventory by $580 million.

The plans follow news in December that the company would close at least 100 to 120 stores to raise cash after a disastrous holiday season in which revenue at stores open at least a year -- an indicator of a retailer's health -- fell 5.2 percent in the eight weeks ended Dec. 25.

"We're executing actions to unlock the value of our portfolio and assets," said CEO Lou D'Ambrosio in a call with analysts.

Shares soared 18.66 percent Thursday, or $9.72, to $61.80 on the news, despite that the company also reported a $2.4 billion loss for the fourth quarter that was much worse than what analysts had expected.

The climb extended a rally the retailer has enjoyed since January as its assured suppliers and investors that it can honor its financial agreements.