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Sears Holdings loses nearly $1 billion in first half of year

By Elizabeth A. Harris
New York Times

Sears Holdings announced Thursday that it had lost nearly $1 billion in the first six months of the year.

The company has been bleeding money for several quarters as its leadership tries to transform the business from a traditional retailer into a more targeted company that relies on loyal shoppers, who are offered personalized deals.

Members of its Shop Your Way rewards program accounted for 73 percent of quarterly sales, the company said Thursday, and its online sales in the quarter grew 18 percent from the period a year earlier.

Nonetheless, rewards for the company have not materialized.

Sears Holdings, which owns Sears and Kmart stores, lost $573 million during its second quarter and $975 million during the first half of the year. The company’s quarterly revenue declined to $8 billion, from $8.9 billion in the period a year earlier.

The company’s chief executive, Edward Lampert, a hedge fund magnate whose investment acumen was once compared to that of Warren Buffett, called the performance unacceptable and sought to assure investors that he was committed to reversing the retailer’s fortunes.

“As the CEO and the largest individual shareholder of Sears Holdings, I am personally committed to driving our transformation, improving the profit performance of the company and creating shareholder value,” Lampert said in a statement.

Part of Lampert’s plan for Sears includes closing underperforming stores. The company reported that it had closed about 95 stores this year, out of about 130 locations it previously said it would close. Once those stores are shuttered, the company will have about 1,900 Sears and Kmart big-box stores in the United States.

On a call recorded for investors, company executives pointed to several weak spots that helped lead to the disappointing performance. The grocery business – which several major competitors, including Target and Wal-Mart, have emphasized in recent years to encourage frequent trips to their stores – was described as poor, as was the household business.

An area that was called out as a positive indicator could also be read with some trepidation. Executives said that a year ago, domestic sales of mattresses and appliances, which were once thought to be synonymous with the company, in its existing stores had declined 0.8 percent, but this quarter they rose despite a difficult environment for consumer electronics. The increase, though, was a meager 0.1 percent over the previous year.

Sears Canada accounted for 16 percent of the company’s decline in revenue for the quarter, and executives reminded investors Thursday that the company hoped to sell its 51 percent stake in that entity, which it believes will generate $765 million in cash.

Also reflected in the quarterly earnings Thursday was the separation of Lands’ End from the business.

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