Sears Replaced on S&P 500

Since Sears Holdings'

public float has fallen below the 50 percent threshold required for inclusion in the S&P 500 and stayed that way for some time, the company is being replaced by LyondellBasell

as of September 4. Shares of Sears are currently down 4.79 percent pre-market, while LyondellBasell shares are up 3.53 percent on the news. Removal from the S&P 500 follows news that Sears is trying to separate its Hometown and Outlet businesses. Sears Holdings will no longer have any ownership rights over the Hometown business, which will become a separate publicly traded entity. Recent financial results for Sears showed second quarter EBITDA that made substantial improvements due to gross margin expansion that was only slightly offset by lower sales. Same store sales for the quarter decreased across the board, (Sears down 2.9 percent and Kmart brand down 4.7 percent), and Bank of America noted that the largest decline in sales was in consumer electronics as a result of price compression. Recent weather conditions have also lowered lawn and garden equipment sales affected by the drought, and improved inventories among stores has lowered clearance sales. Although not a great quarter for Sears, initiatives announced earlier in 2012 have made progress regarding inventories, (the goal was a $600 million reduction, despite lower sales), and the company has boosted liquidity on asset sales and overhead reduction costs. The company has time to improve through the end of 2012, despite being removed from the S&P 500. Asset sales and company restructuring efforts have afforded Sears some time to regain ground in the retail sector in order to compete with Wal-mart

and Home Depot

which reported domestic sales up 2.2 and 2.6 percent, respectively. Perhaps the sale of more assets could occur over the next few quarters in order to continue the company's liquidity boost and restructuring efforts. With the separation of businesses and the removal from the S&P 500, what can investors expect near-term? Despite being a weaker retailer in America, the company is making efforts to sustain itself from share losses over leveraged brands and competing retailers. Sears

witness gross margin increases in the second quarter as thanks to JC Penney's

recent problems. ISI Group reported that 78.5 percent of Sears stores are within a five mile radius of a JC Penney, which has recently been trying to make efforts to

. JC Penney also reported

. Amid concerns about Sears' core company strength, an upswing ahead of and going into the 2012 holiday season is likely to occur and possibly even allow the company's return to the S&P 500.