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Sears’ Q1 Sales Tumble 20%

Sears Holdings said fiscal first-quarter revenue fell 20 percent in a vicious cycle of store closings and sales declines.

The closings, which number 347 since last year, cost the company $557 million in lost revenue, for a total take of $4.3 billion for the three months, ended April 29.

The retailer operated 624 Kmart and 651 Sears locations at the close of the quarter, for a total of 1,275 stores. This compared with 896 Kmart and 726 Sears stores that were still open last year, a total of 1,622.

Closures aside, Sears posted an 11.9 percent drop in same-store sales, which accounted for another $417 million of its Q1 sales decline. Broken out by chain, Kmart’s comps decreased 11.2 percent, while comps at Sears’ namesake flagship stores fell 12.4 percent on weakness in its core appliance, apparel and lawn-and-garden categories.

Net income was $244 million, compared with a year-ago loss of $471 million, although adjusted earnings, which include a host of one-time items, show a net loss of $230 million, compared with a year-ago net loss of $199 million.

“While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing,” chairman/CEO Eddie Lampert said. “We recognize that we need to accelerate our efforts to improve our operational performance and are moving decisively with our $1.25 billion restructuring program.”

The cost-cutting effort has already realized $700 million in annualized savings by closing stores, pink-slipping senior management and combining top Sears and Kmart retail operations posts. Other achievements included extensions on more than $1 billion in debt and pension obligations, and new incentives for its Shop Your Way VIP loyalty program that resulted in more than a 50-percent increase in membership year over year.

“We remain focused on driving the growth of our Shop Your Way ecosystem and are pleased with the traction we gained with our VIP membership base,” Lampert said.

Wall Street rewarded the cost cuts, payout extensions and first-quarter profit by sending Sears shares up 22 percent in late-morning trading.

Separately, Sears posted a blog to its corporate site that recounts its heritage, its longstanding status as a Fortune 500 company, its role in the U.S. retail industry, and contribution to local economies (see infographic, below).