Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=228470
Story Retrieval Date: 10/25/2014 1:59:24 AM CST

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Supraja Seshadri/ MEDILL

Hoffman Estates-based Sears Holdings Corp. lost $358 million and $1.4 billion, respectively, in its fourth quarter and full year earnings. 


Sears loses big in 4th quarter but says it is investing in the future

by Supraja Seshadri
Feb 27, 2014


Sears Holdings Corp. reported a steep loss in the fourth quarter Thursday, but the struggling retailer attributed the disappointing showing to increased marketing expenditures and investments in its core business. Even so, the company’s share price rose over 8 percent.

In the fiscal quarter ended Feb. 1, the Hoffman Estates-based department store chain lost $358 million, or $3.37 loss per diluted share, an improvement from the loss of $489 million, or $4.61 per share, it incurred in the same period last year.

Wall Street analysts surveyed by Zacks Investment Research Inc. were expecting Sears to lose $2.50 per diluted share.

Sales dropped 13.6 percent to $10.59 billion from $12.26 billion the year-ago period. The company said the decline was due to lower domestic comparable-store sales as well as fewer Kmart and Sears full-line stores because of store closings.

However, Sears CEO Edward S. Lampert pointed to areas of growth.

“For the full year 2013, sales derived from Shop Your Way members grew to 69 percent of total Sears full-line and Kmart sales, up from 59 percent last year,” Lampert said in a release. “Our online and multi-channel businesses grew 10 percent over the prior full year.”

Lampert said it has been investing hundreds of millions of dollars annually in the company’s transformation, which is focusing on integrated shopping experiences such as Shop Your Way, an online rewards program that uses social media.

“While transformations of this size are challenging, and our financial results do not currently reflect our progress in member engagement, we believe the changes we are making through Shop Your Way and integrated retail will benefit us in the changing retail landscape,” Lampert said.

Analysts say that online rewards programs have to be the future of the company because Sears continues to liquidate and sell its most valuable and profitable assets, to cover its cash burn. Sears is in the midst of spinning off Lands’ End, the preppy catalog and store retailer it purchased 12 years ago for nearly $2 billion.

“These losses are higher once you strip out Lands’ End,” said Mary Ross Gilbert, the managing director of Imperial Capital LLC. “They have over a billion dollars of cash requirements and they’re losing money from operations. The way they’re going to fund the cash burn is by selling off assets,” Gilbert said. She was referring to Sears Hometown and Outlet Stores and Sears Canada, which Sears partially or entirely spun off in the past few years.

Gilbert added that the sudden spike in Sears’ share price could be in anticipation of Lands’ End’s spin-off, which could yield $500 million for shareholders.

For the full year 2013, the company lost $1.37 billion, or a $12.87 per share, compared with a $930 million loss, or $8.78 per share, in 2012.

Sales totaled $36.19 billion, down 9.2 percent from $39.85 billion the previous year.

Sears Holdings shares closed Thursday at $42.94, up $2.54 or 6.29 percent.
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