Sears Holding Corp reported a surprise quarterly loss that dimmed investors' hopes that Chairman Eddie Lampert could succeed in turning around the struggling retailer. The company's cost cuts, its main focus, failed to keep pace with declining revenue, sending it to a loss of 17 cents per share before special items. That was far short of the analysts' average forecast of a 35-cent profit and sent Sears shares down more than 10 percent on Thursday.
The housing crash continued to take its toll on the company's Sears, Roebuck and Co department stores and their Craftsman tools and Kenmore appliances. "Basically this is what we've been seeing for awhile," said analyst Gary Balter of Credit Suisse in New York. "They're losing market share and making it up on expense reduction.
"Younger customers just won't go to Sears," he said. "They go to Home Depot." Sales at Sears stores open for at least a year fell 12.5 percent in the second quarter ended August 1, while Kmart's same-store sales slid 3.9 percent. The overall decline for the company accelerated to 8.6 percent after slowing during the past two quarters.
While Sears cut total costs and expenses by 8 percent, revenue fell 10.3 percent to $10.55 billion, short of Wall Street expectations of $10.73 billion. The company, which was formed by hedge fund manager Lampert in 2005 through the merger of the Sears and Kmart chains, had been showing some benefits of its focus on controlling expenses. Earlier this year, it surprised skeptical analysts with a first-quarter profit.
Analysts have been urging the Hoffman Estates, Illinois-based company to close more of its weaker stores. During the second quarter, the company said it decided it would close 28 stores, out of about 3,900. Sears continued its share buyback program, spending $94 million during the quarter. It said it still had authority to buy $371 million of its shares.