Sears Loss Widens, But Tops Wall Street Expectations

Sears Holdings Corp.'s loss widened in its third quarter on a 13% drop in revenue, as the one-time fixture of the U.S. retail landscape continues to dismantle itself in an attempt to shore up its finances.

Results, however, came in above Wall Street's expectations. Shares ticked down 0.12% in premarket trading Thursday after falling nearly 14% this year.

In recent years, Eddie Lampert, Sears's chairman and chief executive, has sought to refocus the retailers operations, spinning off business lines like Lands' End and assets like a big stake in Sears Canada to the company's shareholders. Sears has recently turned to a spate of financing moves that leaned heavily on Mr. Lampert's hedge fund in an effort to raise much-needed cash.

The efforts came as Sears worked to reassure vendors that have been rattled by its financial performance ahead of the holiday season, when retailers typically spend heavily securing inventory for the key selling season. Euler Hermès Group SA, which insures suppliers against nonpayment from retailers, told policyholders that it would cancel coverage on Sears, and vendor finance providers have tightened terms, vendors have said.

Sears said Thursday that it has raised $2.2 billion so far this year, in part from a loan from Mr. Lampert's hedge fund and the sale of some of the company's stake in Sears Canada. In November, Sears said it was also weighing whether to spin off up to 300 of its 712 company-owned stores into a separate entity in which Sears shareholders would be entitled to buy stakes.

As of Nov. 1, Sears had cash balances of $326 million, down from $384 million in domestic-only cash balances a year earlier. Sears said its domestic inventory was down $1.1 billion as of Nov. 1 from a year earlier, excluding the Lands' End business, driven in part by improved productivity and store closures.

For the quarter ended Nov. 1, Sears posted a loss of $548 million, or $5.15 a share, compared with a loss of $534 million, or $5.03 a share a year earlier. Excluding costs of closing stores, certain tax matters and other items, the company's adjusted per-share loss was $2.71.

Revenue fell 12.9% to $7.21 billion. The spinoff of Lands' End accounted for $384 million of the decline, Sears said.

Analysts polled by Thomson Reuters had recently expected a loss of $3.31 a share on revenue of $6.88 billion. Sears had said last month that its top and bottom lines in the quarter would be little changed from a year ago.

Gross margin slipped to 22.2% from 23.3% a year earlier, while total expenses fell 12%.

Overall, same-store sales fell 0.1% at domestic stores during the quarter. Sears said its Sears full-line domestic same-store sales fell 0.7%, but noted they would have grown 1% excluding the impact of consumer electronics. The company's Kmart stores posted a 0.5% uptick in same-store sales, led by strength in apparel and outdoor living items.