Sears Holdings Corp. racked up $146 million in third-quarter losses, but plans to keep repurchasing shares and consider acquisitions even as it continues to close stores.
Sears also added to its management team Tuesday, tapping Nick Coe to be senior vice president of the company and president of Lands’ End and Scott Freidheim as executive vice president of operating and support businesses.
Losses for the three months ended Nov. 1 translated into $1.16 a diluted share, more than twice the 49 cent deficit that Wall Street analysts were predicting, according to Yahoo Finance. The loss was driven by weakness at the firm’s Kmart and U.S. Sears stores, as well as a $61 million aftertax charge related to 14 store closures and $46 million in noncash asset impairment charges. Year-ago earnings tallied $4 million, or 3 cents a share.
Sales dropped 8.3 percent to $10.66 billion from $11.62 billion. Same-store sales fell 10.6 percent at Sears’ U.S. stores and 7 percent at Kmart units.
The Hoffman Estates, Ill.-based firm is led by chairman Edward Lampert, the hedge fund manager who masterminded the Sears-Kmart combination and might be looking to make more deals.
“With significant assets and cash flow, we believe Sears Holdings has the flexibility to continue to invest in our business, repay debt and consider acquisition opportunities, as well,” said W. Bruce Johnson, Sears Holdings’ interim president and chief executive officer.
The Sears U.S. division weighed in with operating losses of $183 million for the quarter, down from year-ago earnings of $36 million, as sales fell 9.6 percent to $5.83 billion. At the Kmart division, operating losses widened to $103 million from $59 million as sales fell 7.1 percent to $3.53 billion.
The company said it would close another eight stores and take a $21 million pretax charge in the current quarter. Sears operates 2,300 full-line stores and 1,200 specialty stores in the U.S., and another 380 doors in Canada.
Sears’ board also authorized up to an additional $500 million in share repurchases on top of the $72 million left under a previous repurchase plan.
Shares of Sears closed up $4.25, or 13.4 percent, to $36.09, well below the issue’s 52-week high of $116.79. Sears apparently sees that price as a bargain and said in a filing with the Securities and Exchange Commission that it would consider using its $4 billion credit agreement to repurchase shares.
Jason Asaeda, retail analyst at Standard & Poor’s Equity Research, maintained his “sell” rating on the stock, noting that sales fell $100 million short of his forecast.
“We view [Sears Holdings’] more aggressive closure of underperforming stores as a positive,” Asaeda said. “But we see ongoing challenges in merchandising and marketing.”
Discussing the additions of Coe and Freidheim, Johnson said: “Despite the tough market conditions, we plan to continue to add transformational leaders to our organization. We remain committed to investing in our future by hiring talented leaders.”
Coe brings 25 years of experience to Lands’ End. Most recently, he was senior vice president of merchandise and interim head of design for Gap Inc.’s Banana Republic unit. Prior to that, he spent 19 years in various positions at Levi Strauss & Co.
Freidheim comes to Sears from Lehman Brothers, where he worked for 17 years, most recently as executive vice president and chief administrative officer.
The credit crunch that nearly brought the banking sector to a halt this fall and led to the demise of Lehman Bros. also has touched Sears directly, albeit in a modest way. The retailer’s $4 billion revolving credit agreement comes from a consortium of banks that includes an affiliate of Lehman Bros., which was responsible for $207 million of the total. The Lehman unit hasn’t funded its share of the borrowing since the bank filed for bankruptcy in September, according to Sears’ SEC filing.
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