Shares of Sears Holdings Corp. were up 6 percent, to $60.10, Thursday after
the Hoffman Estates, Ill.-based retailer narrowed its losses by cutting costs for
the second fiscal quarter.
The company's adjusted results, reported early Thursday, met Wall Street's expectations, but revenue fell short because of weaker sales at Sears and Kmart stores.
Sears reported adjusted losses of 86 cents per share on sales of $9.46 billion for the quarter that ended July 28, compared to adjusted losses of $1.18 per share on sales of $10.1 billion last year. The company blamed lower revenue on fewer stores in operation and declining comparable store sales.
Sales in Sears and Kmart stores that have been open at least a year, a key indicator of retail health, declined 2.9 percent and 7.1 percent respectively. The company said sluggish sales were due to four factors: lower sales in consumer electronics and lawn and garden -- areas where Sears has typically demonstrates strength -- as well as lower clearance sales activity and a conversion from brand name to generic drugs in Kmart pharmacies.
The company has reduced inventory and debt and enhanced liquidity, CEO Lou D'Ambrosio said in a Thursday morning memo to employees.
"We did what we said we were going to do," D'Ambrosio wrote.
This year, the company has moved forward with plans to shutter stores and shed some of its Canadian operation. It also said it planned to invest in "customer experience" through its loyalty rewards program "Shop Your Way" and by sprucing up some of its stores.
In the past, analysts have criticized Sears for its approach saying that it can't cost-cut its way to profitability. Sears currently operates 2,587 Sears stores in the U.S. and Canada and 1,304 Kmart Stores.
Early on Thursday, retail analyst Howard Davidowitz, chairman of Davidowitz and Associates told the Wall Street Journal that he predicts that Sears is in the process of liquidating.
In an interview with the Tribune, Chief Financial Officer Rob Schriesheim dismissed the speculation saying that the company has invested hundreds of millions into the customer experience across all of Sears' sales channels, including stores, online shopping and social media. "I think we're doing the exact opposite, said Schriesheim. "We have come out and said we are open to different asset configurations that will generate more value for shareholders."
"We're continuously evaluating the best way to invest in the Sears retail ecosystem," he added. "That includes stores, but also includes all online channels and targeted interaction and social media."
Earlier this week, Sears moved ahead with plans to spinoff its Hometown and Outlet stores in the third quarter, in which the company said it expects to raise $446 million. And on Wednesday it joined a network of retailers including Wal-mart and Target to allow consumers to pay for purchases with their mobile phones instead of cash or credit cards in stores.
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