It was an ugly year-end shopping season for Sears.
Sears Holdings Corp.’s shares plummeted in after-hours trading Thursday, after the beleaguered retailer said it expects a hefty loss in the fourth quarter and for the year, as sales for the critical year-end shopping season dropped sharply.
The dismal results raise more questions about its future, as the retailer, which operates Sears and Kmart stores, faces mounting pressures from other, nimbler rivals like Wal-Mart that have lured shoppers away for years. It also underscores the heavy challenges that Eddie Lampert, hedge fund billionaire and Sears’s chairman and CEO, faces to turn around the business.
To improve its business, Sears is shifting away from its focus on running a store network into a business that is members-focused, where its most loyal shoppers receive incentives to buy. The company once again blamed that transition for weighing on results, as it continues to do traditional promotions while investing in its membership loyalty program called Shop Your Way.
At the same time, Sears has been trying to restore profitability by cutting costs, reducing inventory and selling off some assets and spinning off others. Last month, Sears announced it will spin off its Lands’ End clothing business as a separate company, by distributing stock to the retailer’s shareholders.
“The results that we posted are not nearly what we want them to be,” said Lampert in a post on the company website. “They also overshadow all of the work that’s being done by our associates, our vendors and the other businesses we work with, along with everyone who is developing better ways for us to serve our members.”
The retailer said that it expects an adjusted loss between $213 million and $316 million, or $2.01 to $2.98 per share, for its fourth quarter. For the year, it sees an adjusted loss between $811 million and $914 million, or $7.64 to $8.61 per share.
Two analysts surveyed by FactSet had expected a profit of 38 cents per share for the fourth quarter and a loss of $6.80 for the year, on average.
The retailer also said its Kmart and Sears chains combined had a 7.4 percent drop in revenue from stores open at least a year for the nine-week period ended Jan. 6. For Sears Canada, that figure was down 4.4 percent. This is a key measure, as it strips away the impact of recently opened or closed stores.
By division, Kmart had a 5.7 percent drop, while Sears stores in the U.S. suffered a 9.2 percent drop for the quarter to date.
The Hoffman Estates, Ill., company said it expects to release final results for the fourth quarter and full year in late February.
Sears Holding Corp. shares fell 13 percent, or $5.62, to $36.95 in after-hours trading, after having closed down more than 3 percent, or $1.40, to $42.57 in regular trading.