Hoffmann Estates, IL—Sears Holdings posted today a third quarter loss nearly doubled from last year as sales declines at its Sears, Kmart and Canada stores.
For the quarter ended Oct. 29, Sears Holdings said it lost $421 million, or $3.95 a share, last quarter, compared with a loss of $218 million, or $1.98 a share, a year earlier. Excluding one-time items, the company lost $2.57 a share. Analysts’ average estimate had projected a small loss of $2.29.
Total revenue declined 1.2% to $9.57 billion, below analysts’ average estimate expecting $9.6 billion in sales. The company said the sales decline was due to a 0.8% decrease in its U.S .comparable store sales and “the effect of having fewer Kmart and Sears full line stores in operation.”
Comparable store sales fell 0.7% at Sears domestic which the company attributed to lower sales in appliances and consumer electronics but were “partially offset by increase in apparel, including Land’s End.”
Kmart posted a 0.9% decline in its comparable store sales due to a drop in sales at its pharmacy and in apparel and home.
Gross margins slipped to 25.6% from 26.5% as Kmart marked down apparel and Sears’ marked down home appliances and electronics. Sears Canada suffered from currency exchange costs.
Analysts have been critical of Sears Holdings—and specifically its chairman, hedge fund manager Edward Lampert—for cutting costs too much and closing stores rather than upgrading them and improving services.
In his comments today about the report, Lou D’Ambrosio, who became Sears Holdings’ president/ceo earlier this year, seemed to confirm that the most top-line improvement was due to full line doors.
New Online Initiatives Announced
“While we are not satisfied with our performance, we saw improvement in some core areas,” said D’Ambrosio. “Sears Full-line Stores saw improvement, as Sears apparel achieved both comparable store sales and margin rate increases in the quarter. We also saw nearly 20% growth in our domestic online business, and while appliance sales declined in the quarter, we improved our market leadership positions in overall appliances andKenmore. Despite improvement in these areas, our overall results were down, led by declines in Sears Canada, consumer electronics and Kmart apparel.”
Then D’Ambrosio laid out a three point plan to improve performance in the future. The initiatives were aimed at the one area that has had the healthiest sales: online, where sales at Sears.com and Kmart.com grew 19% over last year and contributed 40 basis points to the company’s total third quarter comparable store sales
D’Ambrosio’s initiatives were: No. 1 “rolling out innovative technology applications and devices to store sales associates to deliver value to our customers in Sears and Kmart stores.”
No. 2 “Providing our customers with a faster experience, more product choice, and easier ways to purchase, return and exchange using a combination of online, mobile and store based services.”
No. 3. Expanding features and benefits for the Shop Your Way Rewards membership by offering all members the opportunity to earn 5 times the rewards—“equal to 5% back—every day when they use their Sears Credit Card at Kmart and from November through the end of January at Sears.”
“We believe it is becoming more and more obvious that the future of retail will revolve around the seamless integration of online and offline experiences,” D’Ambrosio added. Sears Holdings has the combination of assets that will allow us to play a large and important role in bringing these experiences to all Americans through integrated retail.”
Commenting on the news, Credit Suisse Analyst Gary Balter said: “We view Sears as the most forward thinking among hardline retailers on the opportunities of ecommerce. It is a shame that the company has seemed resolute in under investing in its core stores, as, in our opinion, the poor consumer experience at the stores takes away from this approach.”
In other news, the Chicago Tribune reported that the the village of Hoffman Estates, where Sears Holdings’ corporate home is located, and a local school district made “significant progress Wednesday toward a legislative agreement that would keep” Sears in Illinois as well as increase revenue for education.
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