Sears Shrinks Net Loss to Beat the Street

Andrew Klips |

Sears Holdings Corp. (SHLD) reported Thursday a smaller-than-expected net loss during the fourth quarter ended February 2, 2013 as the retailer continues to fight the uphill battle back towards profitability under new leadership.

For the quarter, Hoffman Estates, Illinois-based Sears said its revenue contracted by $224 million to $12.26 billion from $12.48 billion in the year prior quarter, largely because of fewer Sears and K-Mart stores, as well as 1.6 lower domestic same-store-sales. Net loss for the latest quarter was $489 million, or $4.61 per share, down sharply from a net loss of $2.4 billion, or $22.63 per share, in the fourth quarter of 2011. Excluding items, adjusted earnings per share were $1.12, more than doubling the 54 cents EPS from the last year’s quarter.

The revenue an earnings per share figures both topped Wall Street expectations of 98 cents and $11.78 billion, respectively. The results also beat Sears’ estimates in January when it said it expected a net loss in the range of $2.64 per share to $3.40 per share.

"Sears Holdings made progress in 2012 improving the profitability of our business, but we know there's more work to be done in 2013," said Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer.

The company ended the latest quarter with $618 million in cash, down from $754 million ath the end of the 2011 quarter, as it made more contributions to its retirement plans and re-paid more long-term debt. Total debt was decreased by $400 million to $3.1 billion.

Inventories were put on a diet, decreasing by about $800 million to $7.6 billion year-over-year.

For the full year 2012, sales slipped to $39.85 billion versus $41.57 billion in 2011. Net losses were far more subdued in 2012 compared to 2011, shrinking to $930 million, or $8.78 per share, from $3.14 billion, or $29.40 per share.

Sears’ comparable store sales in the U.S. improved 0.8 percent in the fourth quarter, but still declined 1.4 percent for 2012. Kmart's comparable store sales declined 3.7 percent for both the quarter and full year. Sears Canada's comparable store sales declined 3.8 percent in the fourth quarter and 5.6 percent for the year.

Total sales have been declining every quarter since mid-2007 as the operator of K-Mart and its namesake stores have been closing locations, keeping less inventory and selling assets in a bid to break the chain of losses. Hedge fund mogul Edward Lampert, who controls about 60 percent of Sears’ stock, named himself chief executive of the company in January, effective February 2. Lampert, chairman of Sears since 2005, is known as a micromanager and expectations are that he is going to lop-off more Sears’ assets to try and generate additional cash for the embattled firm.

Shares of SHLD closed Wednesday at $47.47, up 4.5 percent on the day, and have risen about 26 percent in the past 52 weeks, although still are far from highs of $77.22 hit last March. Shares are up about 18 percent so far in 2013.

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Companies

Symbol Name Price Change % Volume
SHLD Sears Holdings Corporation 11.20 0.21 1.91 387,695
SOT.WT:CA Slate Office REIT n/a n/a n/a 0

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