By Karen Jacobs
ATLANTA (Reuters) - Sears Holdings Corp
The retailer controlled by hedge fund manager Edward Lampert also approved the buyback of up to $500 million of common shares.
"The business is contracting," said Richard Hastings, a consumer strategist with Global Hunter Securities LLC. "The emphasis right now is on tax strategy, inventory and cash-flow management."
As retailers face one of the worst holiday shopping seasons in years, Sears has been clamping down on costs and inventory levels to try to reverse a year-long earnings slump as the weak economy hurts sales at its Kmart and Sears, Roebuck stores.
The company took a charge of 49 cents a share in the third quarter tied to the closure of 14 underperforming stores, and announced to employees in mid-November the shuttering of an additional eight stores.
"We believe we have positioned ourselves well for a difficult holiday shopping season," interim Chief Executive W. Bruce Johnson said in a statement.
Johnson added that Sears would consider additional store closings or divestitures, remodels or repositioning of stores, acquisitions and repurchases of debt and stock to shore up results.
"We view Sears' more aggressive closure of underperforming stores as a positive," Standard & Poor's Equity analyst Jason Asaeda said in a research note. "But we see ongoing challenges in merchandising and marketing."
The loss was $146 million, or $1.16 a share, for the third quarter ended November 1, compared with profit of $4 million, or 3 cents a share, a year earlier.
Excluding special items which also included a gain of 23 cents a share on Sears Canada hedge transactions, the loss was 90 cents a share, compared with a loss of 49 cents expected by analysts on average, according to Reuters Estimates.
SALES CONTINUE FALL
Revenue fell 8 percent to $10.7 billion. Sales at stores open at least a year, or same-store sales, fell 10.6 percent at U.S. Sears stores and were down 7 percent at Kmart, bringing total U.S. same-store sales down 9 percent.
Sears competes with a host of retailers including J.C. Penney Co
"The issue for Sears is how long will the consumer be in a recession and who will be left after the carnage," Credit Suisse analyst Gary Balter said in a research note. Balter added that he expects Sears to continue to lose market share to rivals.
Sears Holdings had a cash position of $1.2 billion as of November 1, down from $1.5 billion a year earlier and $1.6 billion as of February.
The company plans to repay $2 billion of borrowings this month under a $4 billion revolving credit facility, but added it expects to borrow on the facility again in January 2009.
"Access to liquidity will be paramount for Sears into 2009," Morgan Stanley analyst Gregory Melich said in a research note. "We do not believe the brands or real estate have much value in the current environment and would likely be sold at distressed prices should Sears make a sale in the near term."
This year, Sears Holdings has been rebuilding its management and expanding programs such as layaway in a bid to help consumers shaken by tighter lending standards and rising unemployment.
On Tuesday, it announced that three new executives would join the company, including former Lehman Brothers Holdings Inc
Sears, based in Hoffman Estates, Illinois, said an August forecast calling for higher second-half earnings before interest, taxes, depreciation and amortization (EBITDA) was "no longer relevant" because of the weaker economy. That forecast had assumed flat to modest same-store sales declines in the third and fourth quarters.
Sears has bought back 41.4 million common shares since the third quarter of its fiscal 2005 year.
Sears Holdings shares, which have fallen about 68 percent this year through Monday, were up $5.15 or 16.1 percent at $36.99 on Tuesday afternoon on the Nasdaq.
(Editing by Derek Caney and Matthew Lewis)
