Sears quarterly loss narrows as retailer trims expenses

by The City Wire staff ([email protected]) 90 views 

Sears Holdings Corp., the retailer controlled by hedge fund manager Edward Lampert, reported a smaller second-quarter loss, helped by reduced inventory costs.

The net loss narrowed to $132 million, or $1.25 a share, from $146 million, or $1.37 a share, a year earlier, the Hoffman Estates, Ill.-based company said today in a statement. Sales fell 6.6% to $9.47 billion.

CEO Lou D’Ambrosio has been working to keep the retailer’s inventory in line with customer demand, with domestic levels decreasing by $512 million from the year-earlier period. The lower cost of sales in the quarter helped Sears’s gross margin widen to 26.7 % of sales from 25.7% a year earlier.

“They clearly have a lot of issues that need to be addressed; they’re beginning to address them,” said Matt McGinley, a managing director at International Strategy and Investment Group in New York. His firm recommends selling the shares.

Sears has added in-store wireless service, equipped its sales force with iPads and promoted customer-loyalty programs as the retailer works to reverse five straight years of sales declines. Comparable-store sales once again declined, by 2.9% at U.S. Sears stores and by 4.7% at Kmart, hurt by lower electronics prices and declining sales of lawn and garden equipment during the drought.

In February, Sears announced the plans to spin off its smaller-format Hometown, Hardware and and Outlet stores after posting a $2.4 billion fourth-quarter loss, its largest quarterly loss in at least nine years.

Sears said earlier this week that spinoff of about 1,238 stores may raise $346.5 million, less than the $400 million to $500 million it initially projected.

In May, the retailer said it planned a partial spinoff of its Canadian stores that would reduce its stake to 51% from 95%. Sears Canada yesterday said its second-quarter loss widened to $9.9 million amid increased competition from U.S.-based retailers. Sales fell 8.5%..

While the moves stem immediate liquidity concerns, the retailer’s future still is uncertain, McGinley said.

“Am I going to bet on this as a business over the long run? No,” he said. “Are they making progress versus the disasters that they were having over the past year? Yeah, they’re making a little bit of progress.”

Other department stores aimed at middle-income Americans have posted declining sales this year. Kohl’s Corp., the third- largest U.S. department-store company, last week cut its annual profit forecast after second-quarter sales declined 1% to $4.21 billion and net income fell 20%.

J.C. Penney Co., the fourth-largest U.S. department-store chain, reported a $147 million second-quarter loss as Chief Executive Officer Ron Johnson overhauls pricing and merchandise. Sales slid 23% to $3.02 billion.