Sears Holdings narrows loss in 4th quarter

Friday, February 28, 2014

NEW YORK - Sears Holdings Corp. reported a hefty loss in the fourth-quarter on a 14 percent sales drop as the retailer struggles to generate revenue.

But shares rose 6.5 percent as the operator of Kmart and Sears stores narrowed its loss from a year ago. It is also seeing rare sales growth this month.

Eddie Lampert, Sears’ chairman, chief executive officer and a hedge-fund billionaire, called it a “tough to terrible” Christmas season for the company.

Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. It faces mounting pressure from nimbler rivals such as Wal-Mart Stores Inc. and Home Depot.

Sears is shifting away from its focus on running a store network into a member-focused business. Loyal shoppers receive incentives to buy. Its results have been hurt as it continues traditional promotions while investing in its membership program dubbed Shop Your Way.

Sears has also been cutting costs, reducing inventory and selling assets to return to a profit. It plans to spin off its Lands’ End clothing business as a separate company.

Sears said sales to Shop Your Way members accounted for 72 percent of all business from Sears’ full-scale stores and Kmart stores in the fourth quarter, up from 58 percent a year ago.

But Gary Balter, an analyst at Credit Suisse, said Sears needs to do more to invest in its outdated stores.

“We would expect that 2013 was the nadir, as it is hard to imagine that a retailer can lose that much money on the large sales base that Sears enjoys,” he wrote.

Sears lost $358 million, or $3.37 per share, for the period ending Feb. 1 versus a loss of $489 million, or $4.61 per share, a year ago. Revenue dropped 14 percent to $10.59 billion. The fourth quarter had one less week in the latest quarter and fewer stores.

Sales at stores open at least a year declined 6.4 percent. At Sears stores, the figure fell 7.8 percent on softness in categories such as tools, consumer electronics and home appliances. It dropped 5.1 percent at Kmart locations on weakness in consumer electronics, toys, drugstore, grocery and household items.

Total costs and expenses fell to $10.73 billion from $12.88 billion. Merchandise inventories fell to $7 billion from $7.6 billion.

For the year, Sears lost $1.37 billion, or $12.87 per share, versus a loss of $930 million, or $8.78 per share, a year ago. Annual revenue declined 9 percent to $36.19 billion.

Shares rose $2.61 to close Thursday at $42.44.

Business, Pages 28 on 02/28/2014