Sears Swings to a Loss, But Shares Surge on New Overhaul Plan

Sears (NASDAQ:SHLD) revealed on Thursday strategic steps it hopes will improve its ability to pay off debt and reassure investors, sending its shares up sharply.

The operator of Sears department stores and Kmart plans to separate its Sears Hometown and Outlet business and certain hardware stores through a rights offering expected to generate proceeds between $400 million and $500 million.

The Hoffman Estates, Ill.-based company will reduce expenses at the high end of its previously provided range of $100 million to $200 million a year and plans to lower peak inventory in 2012 in excess of the previously announced $500 million to $580 million.

Sears is also currently in the process of selling 11 stores to General Growth Properties (NYSE:GGP), which, upon its close in April, will raise about $270 million.

“We are taking immediate actions to address our fourth quarter performance including cost and inventory reductions, honed and targeted marketing, margin actions, and bringing in new talent to strengthen our merchandising and leadership team,” Sears CEO Lou D’Ambrosi said in a statement.

The company saw its shares surge 15% before the bell to $59.81, a sign investors were pleased with the latest strategic measures.

The turnaround follows a weak holiday season that forced the big-box retailer to announce the closure of as many as 120 stores and lay off of more than 9,000 workers.

Sales at stores open more than a year have slid every year since billionaire investor Eddie Lampert took up a majority position in the crumbling business in 2005 -- that’s 19 consecutive quarters.

In the latest fourth quarter, the troubled department store chain reported net loss of $2.4 billion, or $22.47 a share, compared with a year-earlier profit of $374 million, or $3.43.

Excluding one-time items, the company earned 54 cents a share, below average analyst estimates of 78 cents in a Thomson Reuters poll.

Revenue for the three months ended Jan. 28 was $12.48 billion, down from $13 billion a year ago, but beating the Street’s view of $12.44 billion.

Comparable sales were down another 4.1% at its namesake stores and 2.7% at Kmart.