Sears Prepares for More Store Closings as Revenue Slumps

(Bloomberg) -- Sears Holdings Corp. kicked off another fiscal year with declining sales from a dwindling number of stores, and more closings are on the way.

The operator of Sears and Kmart stores posted a first-quarter loss of $3.93 a diluted share. Revenue fell due to fewer stores and a 12 percent drop in comparable-store sales. The Hoffman Estates, Illinois-based retailer said Thursday that it has identified 100 unprofitable stores, and 72 of them will begin store-closing sales in the near future. It will announce the locations to close by midday.

Shares fell as much as 12 percent Thursday to trade under $3. They’d already lost 10 percent this year through Wednesday’s close.
The decline in comparable-store sales, a key metric in retail, should be “alarming” to investors, said Noel Hebert, a Bloomberg Intelligence analyst.

“You’ve basically closed half the store base over the last few years and your ‘best’ stores are still negative 12 percent,” he said.

Chief Executive Officer Edward Lampert has been striving to revive the company by closing unprofitable stores and selling or spinning off assets like its Lands’ End clothing unit. But Sears has lost about $11 billion since 2012. Now it’s hired a second set of advisers to re-shop its Kenmore appliance brand along with some home-services businesses. In April, Lampert’s hedge fund, ESL Investments Inc., said it was willing to purchase those assets itself.

“Our top priority is successfully executing our transformation to return to profitability and remain a competitive retailer for years to come,” Chief Financial Officer Rob Riecker said in a prerecorded call.

The retailer said in a statement that it plans to take further action “with respect to certain near-term maturities of our debt, including through repayments, refinancings and extensions.” First quarter sales were $2.9 billion, compared with $4.2 billion a year earlier, Sears said.

A rally in Sears bonds triggered by the company’s search for asset buyers is casting doubt on plans for reducing the retailer’s debt, Lampert said earlier this week. He’s the retailer’s biggest shareholder and has been using his own money for years to keep the 125-year-old chain open.

--With assistance from Brandon Kochkodin.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Cecile Daurat, Jonathan Roeder

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