Sears Reports $2.4B Net Loss

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Hoffman Estates, Ill. - Sears Holdings reported a net loss of $2.4 billion in its fiscal fourth quarter, and revealed the sale of 11 Sears locations and the spinning off of businesses to raise cash.

Sears said it will raise as much as $770 million through a rights offering for its Hometown and outlet businesses and select hardware stores, and through the sale of 11 Sears stores.

Separating the Hometown, outlet and hardware operations is expected to raise $400 million to $500 million, which will provide additional liquidity and will likely be used for general corporate purposes, the company said.

The sale of the full-line Sears stores, to General Growth Properties, will generate $270 million. The transaction is expected to close in the next 45 to 60 days, although the stores will continue to operate as Sears locations into 2013. Final closing dates will be announced later this year.

The sale announcement came on the same day Sears Holdings announced major net losses for its fiscal fourth quarter and fiscal year.

The $2.4 billion net loss from continuing operations attributable to Sears Holdings' shareholders for the fourth quarter compares with net income of $274 million for the prior year's final quarter. The net loss for the year was $3.1 billion compared with the prior year's $133 million net income.

Total revenues decreased $518 million to $12.5 billion for the quarter compared with the prior year. Full-year revenues decreased $1.1 billion to $41.6 billion compared with the prior year. The declines in total revenue were primarily due to lower comp-store sales and the effect of having fewer Kmart and Sears full-line stores in operation.

Sears Domestic's comp-store sales declined 4.1 percent in the fourth quarter and 3.0 percent for fiscal 2011 and Kmart's comparable store sales declined 2.7 percent in the fourth quarter and 1.4 percent for fiscal 2011

For both Sears Domestic and Kmart, fourth-quarter comp sales declines were driven by consumer electronics and appliances, among other categories. And lower margins for CE in the quarter and during the year hurt both units.

Lou D'Ambrosio, Sears Holdings' CEO/president, said, "We are taking immediate actions to address our fourth-quarter performance including cost and inventory reductions, honed and targeted marketing, margin actions, and bringing in new talent to strengthen our merchandising and leadership team, like Ron Boire, who was recently named chief merchant and president, Sears and Kmart formats."

D'Ambrosio continued, "It's also important to distinguish between our earnings issue and the strength of our balance sheet, where we have significant assets and liquidity. We are further strengthening the balance sheet by approximately $1 billion through the actions we are announcing today regarding Hometown, outlet, and hardware stores, a real estate transaction, and inventory reductions.

As we operationally improve the business, we are also accelerating our actions to lead in integrated retail. We are combining our massive retail assets with a set of technology platforms we are building to reshape and deepen our relationships with Shop Your Way Reward members - at the store, online, and in the home."

In a rare

open letter

posted on Sears' corporate website, chairman Eddie Lampert called the results an "anomaly" and emphasized the company's significant liquidity. But he also acknowledged that "The ability to successfully transform the disparate businesses we have in the Sears Holdings portfolio under a single management structure has proven very difficult," and left open the door to further spinoffs.


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