CHICAGO – Sears Holdings Corp. reported another mixed quarter of skidding sales from its stores alongside improved costs and profit margins Tuesday, encouraging investors while leaving questions about its future and direction as a retailer unanswered.
The parent of Sears department stores and Kmart discount outlets reported a modest $58 million third-quarter profit even as net income and sales fell from a year earlier. Its stock rose 6 percent in heavy trading.
Chairman Edward Lampert, the hedge-fund operator who engineered the March merger of the two underperforming retailers, said he was pleased with the improved operating results with the company “focusing relentlessly on profitability.”
But comparable sales continued to sink – 2.8 percent at Kmart stores and 10.8 percent at Sears for the quarter – and Lampert acknowledged that Sears Holdings has “a long way to go.” He reshuffled the company’s top merchandisers this week and promised improvement in Sears’ poor-selling apparel lineup by spring, among other changes.
Analysts said Lampert is delivering on his promises to cut costs and make money but not faring so well when it comes to reversing years of lagging sales at Kmart and especially Sears.
“Financially, it’s not a bad quarter,” said Neil Stern, a retail consultant with Chicago-based McMillan Doolittle. “The concern from a retail perspective is that top-line sales number. It’s not where you want to be as an ongoing, viable retailer. … Long-term, you don’t want to be losing customers.”
Net earnings for the three months ended Oct. 29 were $58 million, or 35 cents per share, down from $150 million, or 93 cents, for Sears and Kmart combined a year ago. Kmart acquired Sears, Roebuck and Co. for $12.3 billion and renamed the enlarged retailer Sears Holdings.
Revenue was $12.2 billion, down from $12.8 billion for the two companies in the same period a year ago.
Lampert, who foregoes conference calls and made his comments in a letter to shareholders, bristled at continuing criticism by “so-called experts” and “vocal doubters.”
He strongly endorsed the company’s Lands’ End unit, which some experts had said could be sold, calling it a world-class brand that is being embraced by customers in early results from its new display format inside Sears stores. The unit markets most of its products through catalogs.
He also said Kmart stores are adding more items from Sears, such as Kenmore and other appliances, Craftsman tools and DieHard batteries.
George Rosenbaum, chairman of Leo J. Shapiro and Associates, a Chicago-based retail consulting firm, called the results encouraging because of the improved showing in apparel and overall at Kmart stores.
Analyst Dan Hess was more negative, saying the company may have made changes to improve its financial operations but hasn’t done a lot to improve the merchandise or the shopping environment in its stores.
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