Sears Posts $279 Million Loss in "Not Acceptable" First Quarter
HOFFMAN ESTATES, Ill.-Declining sales turned the ink from black to red on Sears Holdings' bottom line in its fiscal first quarter, producing a net loss of $279 million, compared to net income of $189 million in last year's first quarter.
In a conference call to financial analysts yesterday, Edward Lampert, Sears Holdings' chairman and (since February) CEO, said flatly, "Our first-quarter 2013 financial performance is not acceptable. A company of our size and with our assets should be generating a significant profit."
Net sales in the quarter, which ended on May 4, fell 8.8 percent to $8.4 billion. This included drops in same-store sales for both Sears and Kmart, 2.4 percent and 4.6 percent respectively. Robert Schriesheim, executive vice president and chief financial officer, said both chains saw sales weakness in their weather-related product categories (such as lawn and garden, outdoor living and sporting goods) and, in Kmart's case, from being not as promotional in grocery and household products in this year's first quarter.
Acknowledging the factors cited by the company's competitors (colder weather, delayed tax refunds and so on), Lampert nevertheless added, "I do not subscribe to the view that the macro factors are the sole reason for our poor performance. They have an impact, but even with that impact, we should be doing a lot better than we are."
He went on to outline several steps Sears Holdings will take to improve its business. "We've made significant investments in digital capabilities and have built a very large group of engaged members on the Shop Your Way platform." The latter is the company's program that allows members to shop in-store or online, follow brands and stores to see when they offer deals, provide product reviews, and create custom wish lists and catalogs and share these with friends.
Lampert also mentioned meetings he has held with the company's executive leadership. "For those who may be inclined to accept current performance levels for incremental progress, I've made clear that I have much higher expectations," he said. "It will take a bit of time, but I'm committed to having a leadership team which is aligned, accountable and that understands what we need to do to transform this company."
Further hurting the bottom line, gross margin in the quarter slid 220 basis points to 25.5 percent. Selling, general and administrative expenses were down 9.3 percent in dollars and 20 basis points as a percentage of sales, to 26.2 percent.