Sears 3Q loss widens as sales soften at stores

Sales declines at Kmart and Sears stores led to a widened loss in the third quarter for parent company, Hoffman Estates-based Sears Holdings Corp. The ailing department store chain also was hurt because it had to do some heavy discounting to get shoppers to spend.

Sears is the latest retailer catering to lower- and middle-income shoppers to post disappointing results. Several, including Wal-Mart, also have cut their outlooks for the upcoming holiday shopping season because of the uncertain economy. But Sears faces additional pressures: The retailer hasn't adapted as bigger, nimbler rivals have lured away customers over the years.

For the three months that ended Nov. 2, Sears lost $534 million, or $5.03 per share. That compares with a loss of $498 million, or $4.70 per share, a year earlier.

Revenue fell 7 percent to $8.27 billion, mostly because it had fewer Sears and Kmart stores operating. Revenue at stores open at least a year — an indicator of a retailer's health — dropped 3.1 percent.

At Kmart, sales at stores open at least a year fell 2.1 percent due to declines in consumer electronics and toys were partially offset by increases in clothing and seasonal and outdoor living products. At Sears, the figure fell 4 percent as it suffered a decline in most categories, including consumer electronics, tools and home appliances.

On the news, the company's shares slipped 23 cents to $61.47 on Thursday morning.

To improve its business, Sears is shifting away from its focus on running a store network into a business that is members-focused, where its most loyal shoppers receive incentives to buy. The company said that transition has weighed on results as it continues to do traditional promotions while investing in its membership loyalty program called Shop Your Way.

At the same time, Sears has been trying to restore profitability. Last year, Sears announced plans to cut costs, reduce inventory, sell off some assets and spin off others. Those moves helped it reduce net debt by $400 million and generated $1.8 billion in cash from the asset sales in the latest fiscal year.

And last month, Sears said it's considering separating its Lands' End catalog business and Sears Auto Center businesses from the rest of the company. The retailer also plans to continue closing some unprofitable stores. And it's selling some store leases in Canada.

Eddie Lampert, a hedge fund billionaire and Sears' chairman and CEO, acknowledged on Thursday during an interview with The Associated Press that he thought the company would be profitable by now.

But he said that Sears is making progress toward building its Shop Your Way program, which now accounts for 70 percent of sales, up from 65 percent in the second quarter. He noted that the company is using data to make targeted offers to its Shop Your Way customers. Online, sales have been up 17 percent so far this fiscal year.

“The focus is less on selling products and just running stores,” he said. “But serving members first.”

Lampert also said he often visits stores and is proud of them. But he said they aren't perfect. “Are there parts that could be better? Absolutely,” Lampert said.

But some analysts say that the company needs to concentrate more on making its stores more inviting.

Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, posts photos of select Sears stores on his website that show dirty floors and depleted inventory.

“They're the most irrelevant big box retailer and the most irrelevant store anchor in the mall,” Sozzi said.