Sears sacked for a loss in fourth quarter
Seeking to explain why fourth-quarter profits tumbled 47 percent, billionaire financier and Sears Holding Corp. Chairman Edward Lampert compared the company's turnaround to Super Bowl MVP Eli Manning's win.
The quarterback of the New York Giants remained focused and worked hard until finding success in this year's Super Bowl in an upset, Lampert said.
"Like Eli Manning, we know what it's like to be underestimated and questioned, but we intend to keep working on our game to achieve our full potential," Lampert said in a 14-page letter to investors. "Looking forward, I continue to be excited about the prospects for Sears Holdings."
The analogy by Lampert, a self-described lifelong New York Jets fan, prompted skepticism by some analysts.
"When companies are doing badly, they get very creative," said Nell Minow, editor of the Corporate Library, a Portland, Maine-based corporate-governance research firm. "It's like a kid explaining his bad report card."
The Hoffman Estates-based company, controlled by Lampert's hedge fund, said its earnings skidded to $426 million, or $3.17 per share. That's down from $811 million, or $5.27 per share, during the same period last year.
Revenue slipped to $15.07 billion from $16.18 billion.
The performance was in line with Wall Street forecasts after the ailing company warned last month that eroding sales might push its profit down as much as 57 percent.
Excluding a one-time gain from the sale of some assets, Sears said it earned $3.04 a share during the quarter.
Analysts surveyed by Thomson Financial expected profit of $3.10 per share on higher revenue of $15.26 billion. Analyst forecasts typically exclude one-time items.
For the fiscal year, Sears suffered a similar slowdown, earning $826 million, or $5.70 per share. That's down more than 44 percent from the previous year's profit.
Sears said it had about $1.6 billion in cash on hand -- far less than the $3.8 billion the company had last year -- as it continued to pour tens of millions into buying back stock.
In his note to investors Thursday, Lampert sought to silence critics as he defended his decision to buy back shares rather than to remodel stores showing their age.
However, many investors have regarded Sears as a hedge fund masquerading as a retailer under Lampert, who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005.
The company invests in foreign currency contracts as well as complex credit derivatives popular among hedge funds.
Investor confidence has appeared to melt away in recent weeks as Lampert's prospects of fixing Sears become more daunting.
Earlier this year, Lampert announced he would give greater autonomy to the leadership of Sears' various business lines. At the same time, Chief Executive Officer Alwyin Lewis resigned.
Lampert said the search for a new CEO continues. Media reports speculate several high profile retailers have turned down the job.
Although shares dipped immediately following the earnings announcement, shares fell just 20 cents Thursday, to $101.40.
"In 2008, we need to reverse much of the profit erosion we experienced in 2007," Lampert wrote to investors. "It won't be easy, especially if the economy stays soft."