Sears Holdings Has $9 Mln Loss on Costs, Shares Drop (Update9)
June 7 (Bloomberg) -- Sears Holdings Corp. posted a $9 million loss in its first quarterly report, sending the shares down the most since the company was formed in March when Kmart Holding Corp. bought Sears, Roebuck & Co.
The company, based in Hoffman Estates, Illinois, lost 7 cents a share on sales of $7.63 billion. The results, which were reported today in a regulatory filing for the quarter ended April 30, include 13 weeks for Kmart and five weeks for Sears Roebuck.
Sales at Kmart stores fell 2.3 percent from a year earlier as Chairman Edward Lampert redesigns locations with centralized cash registers and adds fashionable apparel much like Target Corp. Sears Holdings, the No. 3 U.S. retailer, had costs of $3 million for firing 850 employees and $90 million for an inventory accounting change.
``It will take many quarters for a picture to emerge that demonstrates their combined merchandising operations,'' said Richard Hastings, an analyst at New York-based Bernard Sands LLC. ``Right now you're going to see non-recurring costs.''
Shares of Sears Holdings fell $10.15, or 6.6 percent, to $144.76 at 1:07 p.m. in Nasdaq Stock Market composite trading. Before today, they have risen 150 percent in the last year as Lampert, 42, sold real estate to retailers including Home Depot Inc. and bought Sears Roebuck for $12.3 billion.
Kmart posted earnings of $93 million a year earlier, its second consecutive quarterly profit, after cutting costs. Sears had a loss of $859 million.
Acquisitions
Lampert said he's considering other investments to lift the company's performance. ``We will opportunistically pursue investments in, and acquisitions of, other companies, joint ventures and strategic alliances,'' Lampert said in a letter to shareholders posted on the company's Web site today.
Sears Holdings, unlike most public companies, didn't hold a conference call with analysts and investors. Nor did it announce when it would release results.
Both Kmart and Sears struggled to boost sales as they lost shoppers to Bentonville, Arkansas-based Wal-Mart Stores Inc. and other rivals. Kmart's sales at stores open at least a year declined in at least 12 of the prior quarters while Sears fell for 14 of 16 past quarters.
Comparable sales fell 3.7 percent at Kmart and 3.1 percent at Sears in the first quarter, the company said. Cold weather in March and April and construction at stores being remodeled hurt sales at Kmart.
Apparel
The remodeled stores, named Sears Grand and Sears Essentials, will be mostly located in more affluent areas and outside of malls to make them more convenient for shoppers. Sears Holdings Chief Executive Alan Lacy, 51, opened 10 Sears Essentials stores as of the end of May and expects to have 50 by the end of 2005, the company said.
The company is also adding fashionable apparel and private brands, following the lead of Target and J.C. Penney Co. Sears Holdings during the first quarter announced its home goods line by designer Ty Pennington, host of ABC's TV's ``Extreme Makeover: Home Edition.'' A new private women's clothing line called Parallel by BCBG Max Azria Group is aimed at women aged 18 to 35 and new Latina Life clothing targets Hispanic shoppers.
Target and J.C. Penney have increased sales with their private home and clothing brands by designers such as Michael Graves and Chris Madden respectively. Target's first-quarter same-store sales jumped 6.2 percent and Penney's increased 3 percent.
More Firings
The acquisition will enable Sears and Kmart to share private brands, such as Kmart's Thalia Sodi clothing and Martha Stewart linens and Sears's Craftsman tools and Kenmore appliances.
The company has notified an additional 1,400 workers that they would be fired or transferred to its headquarters or a transactions processing center in Dallas, the company said. About 300 workers have accepted a relocation offer. The cost for relocating and firing workers will be about $60 million.
Sears Holdings, which has 3,800 locations, also plans to divest its 82-store Orchard hardware chain, the company said May 9. It bought Orchard in 1996.
Of the three analysts tracked by Bloomberg, two rate the stock ``buy'' and one says ``equal weight/neutral.''
To contact the reporter on this story:
Lauren Coleman-Lochner in New York at llochner@bloomberg.net
Last Updated: June 7, 2005 13:09 EDT |
