* 1st-qtr adj loss/share $1.29 vs est loss $0.60
* Domestic same-store sales drop 3.6 percent
* Says considering sale of service contracts business
* Buyer most likely to be financial entity than rival
* Shares down 12 percent after market
By Siddharth Cavale
May 23 U.S. retailer Sears Holdings
cast bigger doubts on the progress of its turnaround after
reporting a bigger-than-expected quarterly loss, hurt by cooler
Shares of the company, which also said it was considering
selling its service contracts business, fell 12 percent to
$51.41 in heavy trading after the bell.
The disappointing results came just months after Chairman
and controlling shareholder Eddie Lampert took over as chief
executive from Louis D'Ambrosio, who stepped down due to a
family member's health issue.
Some on Wall Street saw D'Ambrosio's departure as adding to
Sears' risks, and worried that Lampert's lack of retail sales
experience could hurt the company's attempt to turn around its
core Sears department stores and Kmart chains.
The retailer is trying to revive itself after suffering from
declining sales since 2005, when the hedge fund manager merged
the two iconic U.S. retail chains in an $11 billion deal.
It has been closing stores, tightly managing inventory,
selling real estate and shedding assets.
"(We) intend to reduce our expenses by $200 million and did
so by $46 million in the first quarter. We plan to reduce our
inventory at peak by $500 million (in the year)," Chief
Financial Officer Robert Schriesheim said on a post-earnings
call with analysts.
Under a plan to shore up liquidity by at least $500 million
by the end of 2013, the company said it was considering selling
its protection agreement unit.
The business provides customers with service contracts that
include repair services and product replacements for damaged
"These alternatives could, if successful, create additional
liquidity, in excess of our minimum target of $500 million,"
Schriesheim said in a statement.
Imperial Capital analyst Mary Ross Gilbert said she
understood Sears' rationale behind selling the services
contracts business, calling it one of the few "bright spots" in
the company's overall business.
"I think the unit they talked about selling is a very
profitable business, a good business, and the kind of stepping
away from that, this is the only option they have as they are
burning through so much cash," Gilbert said
A financial entity rather than a rival would be the most
likely buyer, she said.
RESULTS DISAPPOINT AGAIN
The company reported a net loss of $279 million, or $2.63
per share in the quarter ended May 4, compared with a profit of
$189 million, or $1.78 per share, a year earlier. Analysts on
average had expected a loss of 60 cents per share.
Same-stores sales fell 3.6 percent in the United States.
Overall sales fell 9 percent to $8.5 billion, missing the
average analyst estimate of $8.74 billion, according to Thomson
The retailer has also been facing cut-throat competition
from discounters Wal-Mart Stores Inc and Target Corp
, department stores and online rivals.
Target cut its full-year profit forecast earlier this week,
and posted disappointing sales in the first quarter as a chilly
start to spring kept shoppers from buying seasonal items like
Wal-Mart also posted weaker-than-expected quarterly earnings
earlier this month and said its profit for this quarter might
miss analysts' forecast.
Sears shares, which have risen 14 percent over the past
year, closed at $58.17 on the Nasdaq on Thursday.