Sears Posts Wider Loss as Loyalty Program Costs Increase
The net loss in the three months ended Aug. 3 expanded to $194 million, or $1.83 a share, from a deficit of $132 million, or $1.25, a year earlier, the Hoffman Estates, Illinois-based company said today in a statement. Excluding some items, the loss was $1.46 a share.
Lampert, who engineered the merger of Kmart Holding Corp. and Sears, Roebuck & Co. eight years ago, has presided over 26 consecutive quarters of sales declines. Since becoming chief executive officer in February, he has focused on a loyalty program called Shop Your Way that offers discounts to get customers to visit more often. While program members generated 65 percent of sales in the quarter, associated marketing costs weighed on profit, Lampert said today.
Shop Your Way members “redeemed rewards points at a significantly higher rate than last year,” Lampert said. “We recognize how important it is to improve the profitability of our company and I am disappointed that we did not deliver a better result.”
Sears sank 8.2 percent to $39.72 at the close in New York, for the biggest drop since May 24. The shares have fallen 4 percent this year, compared with a 16 percent gain for the Standard & Poor’s 500 Index.
Sales fell 6.3 percent to $8.87 billion. Domestic sales at stores open at least a year fell 1.5 percent, hurt by the decline in appliance sales, the company said.
“Most retailers have reported mid-teen comps in appliances, so the negative appliance comp is quite surprising,” Greg Melich, an analyst with International Strategy & Investment Group LLC in New York, wrote in a note to clients today.
Melich, who has a sell rating on the shares, said the appliance sales drop was a “remarkable share loss” and the retailer “does not appear well positioned” for the fourth quarter.
Comparable sales fell 0.8 percent at Sears’s domestic stores, and retreated 2.1 percent at Kmart locations.
The company said it ended the quarter with cash, equivalents and restricted cash of $681 million, down from $738 million at the end of the same period a year earlier.
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