Published May 03, 2011
May 3, 2011 – By Jessica Wohl
HOFFMAN ESTATES, Illinois (Reuters) - Edward Lampert said on Tuesday there were "no excuses" for the poor first quarter of Sears Holdings Corp <SHLD.O> and it must do better.
Chairman Lampert took the blame for the first-quarter weakness during the annual shareholder meeting -- on the same day the retailer's stock fell almost 10 percent -- even as other companies have said their results would have been better were it not for bad weather, high unemployment and the housing slump.
"In many of our businesses, even in a tougher environment, we ought to be doing a lot better," Lampert, the company's controlling shareholder, told investors.
The meeting came just a day after Sears said it would post a hefty first-quarter loss after a sales slump at home and in Canada, and Sears shares plummeted the most in one day since last May, when the company posted a 38-percent drop in quarterly profit.
The company's sales have fallen every year since it was formed by the 2005 merger of Sears and Kmart.
The first quarter is its worst sales showing since the merger, with a decline of almost 20 percent from the last pre-recession first quarter in 2007, said Craig Johnson, president of Customer Growth Partners, who called the company's management "inept."
Late on Monday, Sears said it expected to post a loss of $1.35 to $1.81 per share for the first quarter ended on April 30. It also reported a 3.6 percent drop in sales at stores open at least a year during the period, including a 5.2 percent decline for its namesake brand.
Sears is shaking things up with a new chief executive officer, who was praised by investors at the annual meeting, where he discussed plans such as a rewards program, fresh apparel and high-tech appliances.
Last year's first-quarter sales were helped by shoppers who bought appliances in time to take advantage of a government stimulus plan. This year, Sears actually sold about 5 percent more appliances, but the average price was down roughly 6.5 percent, CEO and President Lou D'Ambrosio told reporters.
The operator of Sears department stores and Kmart discount stores is updating its clothing lines and expanding the variety of home services it offers as it tries to swing back to stronger sales amid competition from the likes of Kohl's Corp <KSS.N>, Target Corp <TGT.N> and Wal-Mart Stores Inc <WMT.N>.
Sears, which makes roughly one-tenth Wal-Mart's revenue, also faces competition from online rivals such as Amazon.com Inc <AMZN.O>.
Sears named former Avaya Inc <AVXX.UL> CEO and IBM Corp <IBM.N>> executive D'Ambrosio as CEO in late February, succeeding Bruce Johnson, who had been interim CEO since 2008. Some debated the rationale behind appointing a former technology executive with no retail experience.
"What does technology have to do with consumer goods? Everything," D'Ambrosio said, as he walked around to talk about various products, such as a new system that shortens the time needed to assess a car alignment to 90 seconds from 30 minutes.
The company is also continuing to bring out new apparel lines, such as Sofia, endorsed by "Modern Family" star Sofia Vergara, and the Kardashian Kollection for Sears aimed at fans of the reality stars Khloe, Kim and Kourtney Kardashian.
"We view our company as a set of very compelling assets," D'Ambrosio told shareholders.
Both the chairman and CEO spoke about the potential for Sears to sell its brands elsewhere and keep their cachet, much as it has done already by selling some Craftsman tools in Ace Hardware stores. Other companies already harness the power of their brands through other stores and their own, Lampert said, pointing to Apple Inc <AAPL.O> and Nike Inc <NKE.N> as examples.
Neither executive discussed the details of any deals, but acquisitions and the potential for divestitures were clear.
"There are no sacred cows" in Sears' underleveraged portfolio, D'Ambrosio said. "We are here to win."
Sears shares closed down 9.8 percent at $75.88.
(Additional reporting by Brad Dorfman in Chicago; editing by Lisa Von Ahn, Andre Grenon and Bernard Orr)