Sears Falls as Third-Quarter Loss Widens

Sears Holdings Corp. (SHLD), the retailer controlled by hedge-fund manager Edward Lampert, fell the most in more than 10 months after posting a wider third-quarter loss and its 23rd straight quarterly sales decline.

Sears fell 16 percent to $49.17 at 10:08 a.m. in New York and earlier slid as much as 17 percent for the biggest intraday decline since Dec. 27. The Hoffman Estates, Illinois-based company’s shares had more than doubled through the close of regular trading yesterday.

The third-quarter net loss widened to $498 million, or $4.70 a share, from a loss of $421 million, or $3.95, a year earlier, Sears said yesterday in a statement. Sales dropped 5.8 percent to $8.86 billion, continuing a streak of declines that began in 2007.

“Sears is in a very weak operating condition and is not well positioned to recover,” Matt McGinley, a managing director at International Strategy & Investment Group in New York, wrote in a note yesterday. He recommends selling the shares.

Chief Executive Officer Lou D’Ambrosio has worked to lower inventory and other costs while expanding shopper loyalty and layaway programs to try to revive sales. More than half of the sales in the quarter, which ended Oct. 27, came from loyalty- program customers, he said on a conference call. The revenue decline was due mainly to having fewer Kmart and full-line Sears stores in operation, the company said.

“The retail industry continues to change dramatically and rapidly,” D’Ambrosio said on the call. “It will never go back to what it was. We have seen the consequences for those that have not changed fast enough.”

Trimming Inventory

Sears cut inventory levels by $972 million from a year earlier, excluding its spun-off unit, and is headed toward an increase of $1.8 billion in liquidity, D’Ambrosio said.

D’Ambrosio, who took over in 2011 as Sears’s fourth CEO since Lampert merged the retailer and Kmart in March 2005, has added iPads for salespeople and wireless service in stores and as part of a push toward upgrading the company’s technology. Online sales in the quarter grew more than 20 percent, he said.

Sears has been selling stores and other assets after reporting a $3.1 billion loss last fiscal year. Last month, it completed the spinoff of its smaller-format Hometown, Hardware and Outlet stores, raising $346.5 million from its rights offering and a $100 million cash dividend from Sears Hometown. The new company is called Sears Hometown & Outlet Stores Inc.

Sears also completed the spinoff of a portion of Sears Canada this week, reducing its stake to about 51 percent from 95 percent.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net