By Phil Wahba
Feb 27 Sears Holdings Corp said on
Thursday its sales fell in a "tough-to-terrible" holiday quarter
but store closures helped narrow its losses and it made progress
in generating more business via the loyalty program it is
betting its future on.
The company expects to generate $1 billion in cash this year
by selling off some assets including its Lands' End brand,
giving it a cushion while it tries to stanch its sales declines
and get more business from its Shop Your Way program.
While overall sales fell 13.6 percent to $10.59 billion
during the quarter, it said U.S. comparable sales were positive
so far in February at its Sears and Kmart discount stores.
Shares rose 6 percent to $42.89 in morning trade, although
the volatile stock remains well below the 52-week high of $67.50
struck in November.
Sears said its comparable sales fell 7.8 percent at its
namesake U.S. department stores, and 5.1 percent at Kmart for
the quarter ended Feb. 1.
Gross profit margins at its two main chains shrank as it
offered deep markdowns, particularly on electronics and
"We view the stock as significantly overvalued based on
earnings and a declining asset value outlook," Credit Suisse
analyst Gary Balter said in a research note.
Sears is trying to move away from its traditional model of
relying on stores for revenue, to focus on one based on
membership through its Shop Your Way program that also
integrates online shopping.
Chief Executive Officer Edward Lampert, a hedge fund manager
and Sears' largest shareholder, acknowledged it was a
"tough-to-terrible" holiday season which underscored the
importance of his transformation plan to reflect changing
"We build relationships with our members, anticipate their
needs and serve them in the manner most convenient for them,"
Lampert wrote in a letter on Thursday to investors, employees
It made progress on that front last year, when some 69
percent of sales were generated through the Shop You Way
program, compared to 59 percent a year earlier. Online sales
rose 10 percent for the year.
The retailer reported a net loss of $358 million, or $3.37 a
share, in the quarter ended Feb. 1, compared to a loss of $489
million, or $4.61 share, a year earlier.
To preserve cash and fund further investment in Shop Your
Way, Sears has been closing stores and selling off assets.
Last year, it announced plans to separate its Lands' End
clothing brand and auto-service centers. Lampert expects those
efforts and others to raise $1 billion this fiscal year.
But Credit Suisse's Balter questioned the wisdom of selling
Lands' End and the impact it would have on Sears going forward.
"The company is losing over $12 a share in cash flow each
year, and is spinning off one of its last remaining profitable
pieces," he wrote.
Rival chain Kohl's Corp reported a fourth quarter
profit of $1.56 per share on Thursday, two cents better than
expected, as leaner inventory levels limited the damage of
deeper discounting during a competitive holiday season.
Kohl's has been trying to boost sales by bringing in new
merchandise and improving its loyalty program. It is also
building up its e-commerce, where sales hit $1.7 billion last
year, double what they were three years ago.
"We're seeing signs these things are starting to work," said
Edward Jones analyst Brian Yarbrough.
Kohl's said it expects comparable sales, which include
e-commerce and sales at stores open at least a year, to be
unchanged or rise as much as 2 percent, an improvement over last
fiscal year, when they fell 1.2 percent.
Kohl's shares were up 1 percent to $55 in morning trading.