UPDATE 5-Sears warns of lower profit; shares fall
(Adds forecast details, updates share price)
ATLANTA, Jan 14 (Reuters) - Sears Holdings Corp (SHLD.O) said on Monday that U.S. same-store sales fell 3.5 percent in the holiday period and warned fourth-quarter profit could be less than half that of a year ago, sending its shares down 5 percent.
The retailer controlled by hedge fund manager Edward Lampert blamed the weak holiday sales on increased competition, the crumbling U.S. housing market and the credit crunch -- problems it had flagged in November.
Sears' shares sank to as low as $86.04 in Nasdaq trading on Monday, levels not seen since early 2005, before ending down $4.79 at $91.38.
The stock of the company, which was created by the merger of Kmart and Sears, Roebuck, has fallen 30 percent since it began trading as Sears Holdings in March 2005. It is down more than 50 percent from a high of $195.18 in April 2007.
Wall Street analysts downgraded Sears Holdings' stock, citing its vulnerability to an economic downturn.
"We expect the retailer to experience accelerated share loss and profit pressures in an increasingly tough macro backdrop," Adrianne Shapira, analyst at Goldman Sachs, said in a research note. She downgraded Sears to "sell" from "neutral."
Gary Balter, analyst at Credit Suisse, cut Sears to "underperform" from "outperform," saying the value of Sears' real estate, which had helped support the stock even as sales and earnings fell, "has declined materially." Balter cut his price target on the stock to $70 from $150.
In the nine weeks ended Jan. 5, same-store sales, which measure sales at established stores, fell 2.8 percent at U.S. Sears stores and 4.2 percent at Kmart stores. Such sales have fallen at both chains for the past seven quarters.
Weakness in apparel, tools and seasonal products offset a rise in sales of home electronics, Sears said.
Sears Holdings has been struggling to draw shoppers amid competition with chains such as Macy's Inc (M.N) in clothing and Wal-Mart Stores (WMT.N) and other discounters in general merchandise. In appliances, it vies with Home Depot (HD.N) and Lowe's Companies (LOW.N).
Sears, which late last year offered to buy specialty retailer Restoration Hardware RSTO.O, said its gross margin rate fell 200 basis points in the holiday period, dragged down by deep discounting to clear winter inventory and lower profits from electronics.
As a result, the company said, it expects earnings of $350 million and $470 million, or $2.59 to $3.48 a share, for its fiscal fourth quarter ending Feb. 2, down from $5.33 a share a year earlier. Analysts on average expected $4.37 a share, according to Reuters Estimates.
For the year, Sears forecast net income between $744 million and $864 million, or between $5.13 and $5.96 a share.
Sears also said it repurchased 4.9 million common shares at a total cost of $513 million, or $105.46 per share, during the 10 weeks ended Jan. 11. (Reporting by Karen Jacobs in Atlanta, Aarthi Sivaraman in New York and Brad Dorfman in Chicago; Editing by Steve Orlofsky and Tim Dobbyn)
