Sears posts unexpected Q1 net loss

Sears Holdings Corp, the largest US department-store chain, unexpectedly reported a first-quarter net loss as consumers reduced spending on household items and clothing.

The loss of $56 million, or 43 cents a share, compared with net income of $223 million, or $1.45, a year earlier, Sears said yesterday.

Sales declined to $11.1 billion, trailing analysts' estimates.

Sears sought to lure shoppers besieged by soaring food and fuel prices and the worst housing market in more than 25 years.

The owner of the Sears and Kmart chains has lost customers to Target Corp and posted sales declines at stores open at least a year in every quarter since Chairman Edward Lampert combined the companies in March 2005.

"From a fundamental operating perspective, it's been a major disappointment, among the weakest in retailing," said Bill Dreher, a retail analyst at Deutsche Bank Securities Inc in New York.

"They were woefully unable to control their business, they don't have the operational procedures, they don't have the systems." He recommends investors sell the shares.

Excluding items, Sears lost 53 cents a share.

Seven analysts surveyed by Bloomberg estimated profit of 18 cents a share, on average. Four analysts projected revenue of $11.2 billion.

Sears rose $2.27, or 2.6 percent, to $89.36 on Wednesday in NASDAQ Stock Market composite trading. The shares have declined 12 percent this year.

'Against Sears'

"Everything is shooting against Sears right now," said Scott Rothbort, president of Lakeview Asset Management LLC. Sales of appliances, automotive, clothing and home goods are suffering from declines in the housing market, said Rothbort, whose Millburn, New Jersey-based firm holds Sears.

Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of ending, the Conference Board said on Tuesday.

The S&P/Case- Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001.

Lampert ousted Chief Executive Officer Aylwin Lewis in January and reorganized the company into five categories including Internet and brands in an attempt to reverse sales declines.

"We're far from where we need to be," Lampert told about 150 investors at the company's May 5 annual meeting at its Hoffman Estates, Illinois headquarters.

The retailer announced May 27 that it will introduce an exclusive clothing line by Grammy-winner LL Cool J later this year as it tries to win back apparel sales from Target and Wal-Mart Stores Inc.

Sears has some of "the strongest brand recognitions and loyalty", said Marshal Cohen, chief industry analyst for market research firm NPD Group Inc.

"They have yet to find the formula to get the consumer to cross that invisible line" between goods such as lawnmowers and washing machines, and clothing and home decor, Cohen said.

Agencies

(China Daily 05/30/2008 page16)