The company that runs Kmart and Sears stores in the United States, has been closing stores, selling assets and slashing inventory as it continues with efforts to turn around its U.S. business. Sears Holdings has also reduced its stake in Sears Canada (TSX:SCC), which is undergoing a similar downsizing exercise north of the border.
Edward Lampert, the president and chief executive of Sears Holdings and a significant investor in both the U.S. and Canadian companies, faces continued challenges.
Lampert, a billionaire hedge fund manager, combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. But the retail landscape has undergone seismic shifts in recent years and the tie-up hasn't gelled.
To try to get back on track, Sears has shifted its U.S. focus from running a store network to operating an online and offline business tied together by its Shop Your Way loyalty program. Sales to Shop Your Way members accounted for 72 per cent of eligible sales for the fourth quarter — the same as in the third quarter.
Lampert said in a letter to shareholders, employees and members that without the aggressive steps the company has taken, "we would be stuck on the same path that has claimed retailers like Circuit City, Borders, Radio Shack and others."
"Our only option is to become better equipped to support, anticipate and exceed our members' needs," he said.
Sears Holdings lost $159 million, or $1.50 per share, for the fourth quarter period ended Jan. 31. A year earlier it lost $358 million, or $3.37 per share in the fourth quarter. Revenue for the quarter ended Jan. 31 declined to $8.1 billion from $10.59 billion. For the full year, Sears Holdings lost $1.7 billion, compared with a $1.4 billion loss a year earlier.
The results reflect the sale of most of stake in its Canadian unit, the spinoff of Lands' End, and the closure of more Kmart and Sears stores. That helped to trim costs and expenses to $8.23 billion, from $10.73 billion last year.
Sales at U.S. Sears stores open at least a year fell seven per cent. For Kmart, the metric slipped two per cent. Both Sears and Kmart were hurt by weak consumer electronics sales. On Wednesday, Sears Canada reported its same-store sales declined 9.1 per cent and overall revenue fell 17.7 per cent to C$972.5 million.
Sears Holdings said Thursday its plans to form a real estate investment trust are moving forward and it expects it to create and separate that company in May or June. It anticipates between 200 and 300 Sears and Kmart stores being sold to the REIT, with proceeds estimated to be more than $2 billion.
Sears Holdings Corp. has more than 1,700 Sears and Kmart stores. It had 3,523 stores just five years ago.
For the year, Sears' loss widened to $15.82 per share from $12.87 per share, in the prior year. Revenue fell to $31.2 billion from $36.19 billion.
The retailer closed about 234 underperforming Kmart and Sears stores in 2014, with the majority being Kmart stores.
Sears said Thursday that it had about $800 million available under its credit facility and $250 million in cash at quarter's end. Chief Financial Officer Rob Schriesheim said in a statement that the actions it took in 2014 — such as store closures and inventory reduction — generated $2.3 billion in liquidity.
Sears also announced that it is amending and extending a $400 million short-term loan that it took out in September from a hedge fund run by Lampert. The company said it will now repay $200 million of the loan on Monday. The remainder of the loan was extended until June 1 or until the company receives proceeds from the potential REIT transaction, whichever is soonest.
Total long-term debt rose to $3.2 billion from $2.9 billion a year earlier.
Its shares rose 16 cents to $38.06 in premarket trading about 90 minutes before the market open.