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Sears Narrows Q4 Losses, Pivots Plans

HOFFMAN ESTATES, ILL. — Lower costs, higher gross margin rates, and changes to its CE and other business models helped Sears Holdings trim its fiscal fourth-quarter losses.

The company reported a net loss of $159 million for the three months, ended Jan. 31, compared with a yearago net loss of $358 million. It was Sears’ 11th consecutive quarterly loss.

Revenues fell 24 percent to $8.1 billion, due largely, said chairman/CEO and majority shareholder Edward Lampert, to the separation of Sears Canada, the spinoff of Lands’ End and the closure of hundreds of underperforming stores.

Comp sales declined 4.4 percent, reflecting a 2 percent decrease at Kmart and a 7 percent decline at Sears stores, due primarily to CE industry trends. Excluding its CE business, comps at Sears stores would have declined 4.6 percent, the retailer said.

In an open letter to investors, Lampert acknowledged that the company has experienced “significant losses” in CE since 2010, but is making material changes in the category’s business model, as it is in other poorly performing areas.

For the full year, the net loss totaled $1.7 billion compared with a prior-year net loss of $1.4 billion. Revenues fell 14 percent to $31.2 billion, and comps declined 1.8 percent, reflecting a 1.4 percent decrease at Kmart and a 2.1 percent decrease at Sears stores. CE again led the decline, which was offset at Sears stores by improved majap performance. Majaps also helped boost the chain’s gross margin rate in the fourth quarter.

On the appliance side, which Sears considers one of its “best and most important categories,” the company is reinforcing its position as one of the leading U.S. majap retailers; will launch innovative products with exclusive features under the private-label Kenmore brand; and is expanding its white-goods assortment both instore and online.

Lampert said he will continue the company’s digital transformation “from a series of brick-and-mortar locations that sell products into an integrated retailer,” and noted that other business sectors from banking and media to professional sports are also facing fundamental change due to digital disruption.

To stay ahead of the curve, Sears is investing in its mobile-commerce platforms, and is installing e-commerce kiosks and digital signage in its stores, he said.

Lampert added that Sears has repeatedly been written off in the past, citing a 14,000-word eulogy by a Chicago business journal in 1988. Since then, virtually all of the companies that Sears was supposedly trailing are gone and forgotten, he observed.

Sears was also supposedly destined for the dust bin in the 1920s, he said, when, in a reverse of its current strategy, it controversially began building stores to supplement its core catalog business in advance of what would become a massive population shift from rural to urban and suburban areas.