Sears, watching spending and inventory, limits adjusted loss
Sears, stung by higher charges, reported a wider fourth-quarter loss, but its adjusted loss was smaller than last year and investors were encouraged that the company closely controlled inventory and expenses. Wall Street looked past falling comparable-store sales as well, and Sears Holdings Corp. shares rose 5 percent.
Sales at Sears and Kmart stores open at least a year, a key indicator of a retailer’s health, dropped 10.3 percent. Sears samestore sales slid 12.3 percent, mostly hurt by falling sales of appliances, clothing, consumer electronics and tools. At Kmart stores, comparable-store sales fell 8 percent, mainly because of softer sales of consumer electronics, toys, clothing and grocery and household items.
Chief Financial Officer Jason Hollar said a challenging holiday season pressured margins and same-store sales, but the company had a better adjusted profit by watching its inventory and managing costs.
The company also said it would use a big portion of the proceeds from the $900 million sale of its Craftsman brand to Stanley Black & Decker to bolster its ailing pension plan. It will put $250 million in cash and some income from annual payments toward the plan as part of a deal with the Pension Benefit Guarantee Corp, a federal agency that protects private pension plans.
Chairman and CEO Edward Lampert, whose hedge fund has forwarded millions in funding to keep Sears afloat, has long pledged to turn the company’s fortunes around and that the retailer would find ways capitalize on its best-known brands like Kenmore appliances and DieHard car batteries, as well as its vast holdings of land. The faltering retail chain has also said it may sell more locations, cut more jobs and put more of its famous brands on the block as part of its latest plan to revive itself. It has promised to cut costs by at least $1 billion a year, and says it’s reworking its debt to give itself more breathing room. Sears said it would examine its organizational structure, but didn’t specify any more store closings. It already announced in January it would close 150 of its 1,500 stores.
Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. But the retail landscape has undergone seismic shifts since then. While Amazon.com had been up and running for almost a decade at that time, the big disruption in retail went into full force around the time of the recession a few years later.