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Sears, Posting Big Loss, Raising Cash, Sets Strategies


Sears Holdings reported
a net loss of $2.4 billion in its fiscal fourth quarter,
and revealed the sale of 11 Sears stores and the spinoff
of various businesses to raise cash.

The $2.4 billion loss, for the 13 weeks ended Jan.
28, compares with net income of $274 million for the
prior-year period. The net loss for the full year was $3.1
billion, compared with net income of $133 million in
fiscal 2011.

Total revenues decreased 3.9 percent to $12.5 billion
for the quarter, while full-year revenues decreased
2.6 percent to $41.6 billion from 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 comp-store sales declined 4.1 percent
in the fourth quarter and 3 percent for fiscal 2011,
and Kmart’s comp-store sales declined 2.7 percent in
the fourth quarter and 1.4 percent for fiscal 2011.

For both Sears and Kmart, domestic fourth-quarter
comp sales declines were led by consumer electronics
and appliances, among other categories. Lower margins
for CE in the quarter and during the year also hurt
both units.

In a rare conference call, Rob Schriesheim, executive
VP and chief financial officer, described last year
as “an anomaly” in which the company bought too
much inventory, was hit with higher commodity costs,
lost winter apparel sales to the unusually mild weather,
and took charges for store closings and other costsavings

In a statement, Lou D’Ambrosio, Sears Holdings’
president/CEO, 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.

“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 conference call, D’Ambrosio said Sears’ multichannel
strategy and new Shop Your Way loyalty program
will drive business by “reshaping and deepening”
the company’s relationship with its customers.

“Technology is transforming the entire retail landscape,
and media and shopping channels are blurring,”
he said.

To that end, the company invested several hundred million dollars last year to improve and differentiate the
customer experience, he noted. Fruits of the expenditures

• a program that allows customers to pick up or return a
purchase at the stores in five minutes or less;

• equipping sales associates with iPads featuring a selling
app that guides them through the customer-qualification
process; and

• following up in-store visits to the CE and appliance departments
with a summary of products that were viewed,
and the ability to purchase them offsite
with one click.

D’Ambrosio said the efforts are
paying off in major appliances, where
market share, average selling prices
and margin rates rose in the fourth
quarter despite general industry
weakness. Sears in fact outpaced
the overall industry in unit and dollar
sales, he said, which helped increase
Kenmore’s market share to 17.8 percent.

Going forward, Sears will continue
to build on those majap gains
through associates’ use of iPads and
sales apps; a test of regionally based
price promotions; and the introduction
of new products and technologies
under the Kenmore badge. New
introductions for this quarter include
a Grab & Go French-door refrigerator
with an industry-leading 31 cubic feet of storage space,
and a new Kenmore Elite large-capacity front-load washer.

In his first public presentation with Sears, Boire, a former
senior Sony, Best Buy and Toys “R” Us senior executive,
said the company must build a customer-focused selling
culture based on an integrated retail strategy. Working in
Sears’ favor is an “extraordinary” amount of investment and
focus, great brands and a strong store base, and a breadth
of assortment that helps differentiate it in the marketplace.

Boire said he plans to improve store layouts to ease navigation,
and will better leverage tangential categories like
CE and apparel, as headphones have become a fashion
statement and “Moms never see our great CE brands.”

On the financial side, D’Ambrosio added, “It’s also important
to distinguish between our earnings issue and the
strength of our balance sheet, where we have significant assets
and liquidity.” Sears is tapping those assets, and adding
to its liquidity, through a rights offering for its Hometown and
outlet businesses and select hardware stores that is expected
to raise $400 million to $500 million, the company said.

The sale of the 11 full-line Sears stores, to General
Growth Properties, a New York real estate investment
trust, will generate another $270 million. That 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.

Sears had previously announced
plans to shutter upwards of 120
locations, and earlier this month
Sears laid off 1.6 percent of its
corporate workforce and enacted
across-the-board price cuts in its
Canadian stores.

The corporate downsizing affected
100 staffers across several
departments at headquarters,
here, where Sears employs about

North of the border, Sears
Canada lowered regular prices
on more than 5,000 items in every
department in each of its 196
company-owned stores as part of an enhanced everyday
low-price (ELP) strategy.

Calvin McDonald, president/CEO of Sears Canada,
said the company would complement the price cuts with
weekly sale items and special limited-time promotions, and
will improve the shopping experience by doing a better job
of matching its in-store merchandising to its sales circulars.

“In order to better compete in a complex and ever-changing
retail industry, the company is committed to getting the
value right for its customers by delivering the right products
in the right quantities at the right prices,” the company said.

– Additional reporting by Alan Wolf