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Sears Narrows Losses, But Store Closings Take A Toll

Third-quarter revenue fell 26 percent on fewer electronics and stores

Sears Holdings served up some good news and some bad news with its fiscal third-quarter earnings this morning.

The good news: Losses for the three months, ended Oct. 28, narrowed, from $748 million last year to $558 million last quarter.

The bad news is it still amounts to over half a billion dollars in losses for a single quarter and, as CNN noted, is setting Sears up for its seventh consecutive year of losses, which total $11 billion since it last turned an annual profit back in 2010.

Part of the problem is a vicious cycle of store closings to cut costs, and revenue hits after they shutter. Sears closed 399 Sears and Kmart stores since the year-ago quarter, which the company concedes contributed to a 26 percent decline in total revenue, to $3.7 billion.

The retailer also attributed the declines to the reduction in CE assortments at both chains — a calculated gamble to supplant their traditional tech selections with smart home products and services.

That also accounts in part for the precipitous drop in same-store sales, which fell 13 percent at Kmart and 17 percent at Sears.

In a statement, chairman/CEO Eddie Lampert said sales were also pressured by “the challenging retail landscape,” but emphasized a $100 million improvement in earnings before interest, taxes, depreciation and amortization (EBITDA).

He attributed the increase to Sears’ strategy of streamlining operations, reducing inventory and trimming operating expenses, and outlined a four-point plan for improving performance:

· find new ways to emphasize Sears’ Shop Your Way digital platform and loyalty program;

· maintain “extreme cost discipline”;

· open more concept stores like its Appliances and Mattresses showrooms; and

· find new revenue streams by selling, licensing or outsourcing its Kenmore and DieHard house brands, Innovel Solutions fulfillment subsidiary, and Sears Home Services repair business.

Sears was able to leverage three of those assets through its Kenmore appliance partnership with Amazon. Under terms of the deal, struck last summer, Sears is selling its private-label majaps directly to the e-tailer, which owns the Sears-warehoused inventory and is employing Innovel and Home Services for white-glove delivery, installation and extended-service support.