Sears continues downward spiral, closing 80 more stores

Sears (NASDAQ: SHLD) reported another dismal quarter, as the retailer seeks to reduce costs and boost sales amid falling revenue and store traffic by shuttering more locations.

Sears said Wednesday that it will seek to cut costs by closing 80 stores this fiscal year. Sears has closed approximately 500 stores since 2005. The retailer operates 1,980 Sears and Kmart stores in the United States.

Sears Canada reported its steepest fall in quarterly sales in almost five years. The company said on Wednesday same-store sales for its Canadian unit fell 8 percent, while total revenue fell 11 percent to $705.8 million in the quarter. This was the steepest fall in sales after a 12 percent drop in the second quarter of fiscal 2010.

Sears announced last week that it was considering selling its Canadian operations as it looks to raise cash and focus more on U.S. operations. Since January, Sears Canada has taken on a goal to reduce 2,200 employees from its payroll, on top of thousands more laid off last year. It has also sold leases to some of its most prominent locations, including the flagship location at the Toronto Eaton Centre, as a cost-cutting measure.

In order to boost sales in the appliance and electronics categories, Sears CEO Eddie Lampert said during an earnings call that the retailer will shift from selling televisions and instead pursue a "connected living" strategy focusing on appliances, fitness equipment, electronics and auto services.

Sears is also squarely focused on the Shop Your Way rewards program and is transitioning from a product-centric to member-centric retail model. According to Lampert, Sears' future lies in building relationships with shoppers, not just trying to complete transactions. 

But if the strategy is working, it hasn't shown up in the financial results. Sears lost $1.4 billion in the last fiscal year and $402 million for the recently completed first quarter. 

"If what (we're) doing is working and makes sense, why is it not showing up in the financial performance?" asked Lampert, during the company's annual shareholder meeting on May 6. "Well, it's a double edged sword, because what's causing us to transform is also one of the reasons for (poor) financial performance."

The Hoffman Estates-based retailer's $402 million loss is much steeper than the $279 million lost during the same period a year ago. Revenue was $7.88 billion for the quarter, down 7 percent from $8.45 billion last year, a decline attributed largely to having fewer Sears and Kmart stores in operation. Dismal performance at Sears Canada and April's spin-off of Lands' End also contributed to the losses, according to the company.

Same-store sales declined 2.2 percent at Kmart stores in the United States, better than the 4.6 percent decline last year. At Sears, same-store sales rose 0.2 percent, an improvement from the 2.4 percent decline last year, due to higher demand for appliances and home products.

For more:
-See this Sears press release
-See this Wall Street Journal article

Related stories:
Sears Canada to cut 1,600 jobs as it outsources, restructures
Sears' focus on the future means more of the same
Sears files to spin off Lands' End business
Sears denies rumors of Canadian unit sale
Sears may split Lands' End, Auto Center business; reports sales drop

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