Sears Holdings Falls After Forecasting Quarterly Loss

Sears Holdings Corp. (SHLD) plunged the most in more than a year after forecasting a fourth-quarter loss and saying sales during the holiday period dropped.

The shares tumbled 14 percent to $36.71 at the close in New York, the biggest decline since November 2012. Sears’ stock rose 19 percent in 2013.

The loss in the quarter ending Feb. 1 will narrow to $250 million to $360 million, or $2.35 to $3.39 a share, the Hoffman Estates, Illinois-based company said yesterday in a statement. The net loss a year earlier was $489 million, or $4.61 a share.

“The numbers are atrocious,” Mary Ross Gilbert, an analyst at Imperial Capital LLC in Los Angeles, said in a telephone interview. “A lot of apparel retailers were challenged in the quarter. And those that executed well were able to come out OK.”

Chief Executive Officer Edward Lampert, the company’s largest shareholder, has been shedding assets, selling locations and spinning off the smaller-format stores and part of the Canadian business amid a continuing sales decline. Last year, Sears announced plans to separate the Lands’ End clothing unit and its auto-service centers.

Sales at stores open at least a year fell 5.7 percent in the current quarter through Jan. 6 at Kmart and 9.2 percent at U.S. Sears stores for a companywide decline of 7.4 percent.

“The results we posted are not nearly what we want them to be,” Lampert said yesterday on a corporate blog on the Sears website.

Moody’s Investors Service downgraded the company’s corporate family debt rating one level to Caa1, from B3, citing “the accelerating negative performance of Sears’ domestic business,” it said in a statement today. It gave the rating a stable outlook.

Multiple Strategies

Lampert, 51, has confounded retail analysts by introducing and abandoning one strategy after another. Adding to his challenges, Lampert has pitted executives against one another by dividing the company into separate operating units, according to dozens of former executives.

He has poured resources into the company’s digital operations, social media and its Shop Your Way rewards program. Sears said that it invested $69 million more in Shop Your Way in the nine weeks through Jan. 4 than in the comparable time frame last year. Members accounted for 69 percent of its sales in the period, the company said.

While Sears has emphasized the program, “that sales base keeps shrinking,” Gilbert said.

‘Needed Transformation’

Lampert wrote on the company blog that “we see signs that it is working. The fact that these results are obscured by our overall performance doesn’t make them any less real or any less central to the needed transformation of the company.”

The company has been raising cash by selling stores and leases. Also on the block: the chain’s automotive unit, a chain of more than 700 service centers offering repairs and routine maintenance such as oil changes.

Lampert is under pressure on two fronts -- from shareholders to revive sales at Sears, and from hedge-fund investors growing impatient with the retailer’s lagging stock performance. Last month, he issued Sears stock to investors redeeming shares in his fund, ESL Partners LP. That reduced his Sears stake to 48 percent from 55 percent.

Sears said it will report full fourth-quarter results on or about Feb. 27 and will host a conference call then, one of the few it’s held since Lampert merged Kmart Holding Corp. and Sears Roebuck & Co. in 2005. Lampert took over as CEO in February 2013.

“Whenever they have bad news to report, they hold an analyst call,” Gilbert said.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.