Sears 3Q Loss Widens as Sales Soften at Stores

Shoppers walk into Sears in Peabody, Mass., Monday, May 14, 2012.  Sears Holdings Corp. said Thursday, May 17, 2012,  that it?s spinning off a stake in its Canada business, as the struggling retailer looks to focus on stemming declining sales at its remaining U.S. stores.  The announcement came as the company reported that returned to a profit in the first quarter, as a result of a gain on the sale of its stores.  (AP Photo/Elise Amendola)
Elise Amendola/AP
HOFFMAN ESTATES, Ill. -- Sears' third-quarter loss widened as the ailing department store operator's results were hurt by weaker sales at its Kmart and Sears stores.

The quarterly results underscore the challenges Sears faces as it heads into the critical holiday shopping season. This period is important for retailers because it can comprise up to 40 percent of their annual revenue.

The retailer is also in the midst of shifting its business, with less emphasis on its brick-and-mortar stores. It has nearly 2,500 stores in the U.S. and Canada.

"We are transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices," Chairman and CEO Edward Lampert said in a statement.

Sears (SHLD) is concentrating on its Shop Your Way Loyalty program, with Lampert saying that the company is enhancing membership benefits and developing digital and social relationships with members.
The retailer said that 70 percent of its sales are made to Shop Your Way members, up from 65 percent in the second quarter.

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

The Hoffman Estates, Ill., company said Thursday that revenue fell 7 percent to $8.27 billion from $8.86 billion mostly because it had fewer Sears and Kmart stores operating.

Revenue at stores open at least a year dropped 3.1 percent. The figure fell 4 percent at Sears' locations and declined 2.1 percent at Kmart stores.

Revenue at stores open at least a year is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Sears, like other stores catering to low to middle income shoppers, is navigating a difficult economic environment. Its shoppers are grappling with old worries like juggling their stagnant wages with daily living costs. On top of that, many low-to-middle income shoppers continue to struggle with a 2 percentage-point increase in the Social Security payroll tax since Jan. 1. They're also facing rising health care costs.

Such a tough environment is putting even more pressure on Lampert as he tries to turn the chain around. The storied retailer hasn't adapted as bigger, nimbler rivals such as Walmart (WMT) and Home Depot (HD) have stolen away customers over the years.

The third-quarter results come as Sears announced late last month that 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 of its unprofitable stores and is selling some store leases in Canada.

Last year, Sears announced plans to restore profitability by cutting costs, reducing inventory, selling off some assets and spinning 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.

Its shares finished at $61.70 on Wednesday. They are up 49 percent so far this year.

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Service at the auto centers seem to have gone downhill as well as ordering from Sears. To many times, items were supposed to be delivered on a certain date and a couple of days before the delivery date, calls were received advising of items not yet in stock or a broken down truck. broke down.

November 21 2013 at 7:53 PM Report abuse rate up rate down Reply
1 reply to lld217's comment

I would steer clear of their auto centers as I have reason to suspect that those shops are charging for services not performed.

November 21 2013 at 8:47 PM Report abuse rate up rate down Reply

The overarching challenge Sears faces as little to do with the demise of its catalogue, or poor customer service, or a whole host of other attempts at explaining Sears disappointing earnings report. Rather the problem is creative destruction.

Earlier this week Walmart disappointed. Then yesterday is was Kohls turn. Target's reported plummeting Q3 earning today, and reduced their outlook for the rest of the year. A more and more consumers shop from their living rooms while lounging in their PJ's, traditional bricks and mortar retailers struggle to just maintain sales. Meanwhile, Amazon sales skyrocket, as overall retail sales growth chugs forward.

November 21 2013 at 4:19 PM Report abuse rate up rate down Reply


November 21 2013 at 4:13 PM Report abuse rate up rate down Reply

Sears started going downhill after they terminated their catalog business back in the 1980\'s. Moreover, I can recall looking for a winter coat at that time, but their racks were lined with cheap looking imports. Surprisingly, I tried picking up a couple pair of pyjamas during that time, but there were none to be found. Their store personnel haven\'t changed much as they are still rude and arrogant.

November 21 2013 at 11:40 AM Report abuse rate up rate down Reply

The Service when you go to any Sears Store is terrible... you can not find anyone to HELP you...
It is under staffed every time I walked in... they JUST do not get it !!!.
It's called Customer SERVICE DUMMY

November 21 2013 at 11:07 AM Report abuse rate up rate down Reply
1 reply to jerri2222's comment

It was the same way with the now defunct Montgomery Ward.

November 21 2013 at 11:25 AM Report abuse rate up rate down Reply