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Sears profit slides, closes more stores

Struggling retailer Sears Holdings Corp. said Thursday its fourth-quarter profit was cut in half as charges weighed down results and shoppers continued to avoid buying pricey appliances — keeping sales mired in their prolonged slump.
/ Source: The Associated Press

Struggling retailer Sears Holdings Corp. said Thursday its fourth-quarter profit was cut in half as charges weighed down results and shoppers continued to avoid buying pricey appliances — keeping sales mired in their prolonged slump.

Still, adjusted results for the owner of Kmart and Sears stores managed to top Wall Street estimates, sending the company's stock up nearly 12 percent before it retreated in a broadly lower market.

Chairman Edward Lampert, who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005, told investors in his long-awaited annual missive that the company's cautious approach to investing capital in stores and closing unprofitable locations — 28 during the fiscal year and another 24 announced Thursday — while paying down debt has helped the chain.

"In the future, there will be many opportunities for us and we intend to seize them," Lampert wrote in the long and sometimes philosophical public letter.

More closures may be possible this year, Lampert said.

The company has been hurt badly by the housing downturn, which particularly affected home appliance sales at its domestic Sears locations. It also cited the pullback in consumer spending brought on by the recession, which hurt home, household goods and apparel sales at Sears and Kmart stores as well as lawn and garden sales at Sears stores.

"Many of our large businesses are highly related to the economy and to housing — appliances, tools, lawn and garden, electronics and fitness," Lampert wrote. "They are not just economically related, but credit-related as well, as they are all big-ticket items that are typically purchased on credit. ... When these sectors rebound, we expect our earnings to rebound as well."

The Commerce Department said Thursday that manufacturers saw orders for big-ticket goods plunge a bigger-than-expected 5.2 percent in January — the sixth straight month of declines.

Overall sales at Sears Holdings fell 12 percent to $13.28 billion, missing analysts' forecast. Same-store sales — a retail industry metric of sales in stores open at least a year — sank 8.3 percent.

Sears' domestic same-store sales dropped 11 percent and Kmart's same-store sales slipped 5 percent, helped by the discount store's lower prices and the promotion of a popular layaway program for holiday shopping.

For the three months ending Jan. 31, the Hoffman Estates-based company earned $190 million, or $1.55 per share. That's down from $426 million, or $3.17 per share, during the same period last year.

Excluding the impact of charges at its Orchard Supply Hardware subsidiary, severance and store closings as well as one-time gains, Sears Holdings earned $360 million, or $2.94 per share — ahead the $2.68 per share analysts surveyed by Thomson Reuters expected.

Lampert said the company's search for a permanent chief executive continues and that the retailer is being "highly selective" as it meets prospective candidates. Interim CEO Bruce Johnson has filled the role for the past year.

Morningstar analyst Kim Picciola said she was glad to get an update on the company's CEO search and said the company — particularly at its Kmart stores — did a better job of managing inventory.

"I think Sears is still continuing to struggle given their merchandising mix," she said. "When you're selling big-ticket items like appliances in this environment it's going to be very difficult to drive sales."

For the full year, Sears said, net income plunged 94 percent to $53 million, or 42 cents per share, from $826 million, or $5.70 per share, in the previous year. Revenue slipped 8 percent to $46.77 billion. Same-store sales dropped 8 percent, while Sears domestic same-store sales fell 9.5 percent and Kmart same-store sales declined 6.1 percent.

Sears has about 3,800 full-line and specialty retail stores in the U.S. and Canada.

Sears shares fell 29 cents to $35.54 in Thursday trading, near the low end of its 52-week range of $26.80 to $112.80.

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AP Retail Writer Michelle Chapman in New York contributed to this report.