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Sears Holdings To Spin-off, Divest Stores After Posting $2.4 Bln Loss

Sears Holdings To Spin-off, Divest Stores After Posting $2.4 Bln Loss
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2/23/2012 10:40 AM ET

Broadline retailer Sears Holdings Corp. (SHLD: Quote) reported Thursday a huge loss for the fourth quarter, hurt by significant tax expenses and impairment charges.

Adjusted earnings plunged from last year, reflecting lower margins and comparable store sales decline amid fewer Kmart and Sears Full-line stores in operation.

However, the company's shares surged more than 20 percent after the company announced some remedial action in order to turnaround the company's results.

"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, like Ron Boire, who was recently named Chief Merchant and President, Sears and Kmart Formats," President and CEO Lou D'Ambrosio said in a statement.

Hoffman Estates, Illinois-based Sears also said actions are underway to further enhance liquidity by about $1 billion and improve operating performance. These include reducing expenses, lowering peak inventory in 2012, sale and spin-off of stores.

Separately, Sears Holdings agreed to sell eleven Sears full-line store locations to mall operator General Growth Properties, Inc. (GGP: Quote) for $270 million, and the deal is expected to close in April 2012. Each of these Sears stores are part of an existing General Growth property.

The company also plans to spin-off about 1,250 of its Sears Hometown and Outlet Businesses and certain hardware stores through a proposed rights offering. The separation will enable Sears Holdings to focus on its core business, and also raise nearly $400 million to $500 million in proceeds.

Sears had warned in late December on its fourth quarter results, and announced certain cost reduction actions, which include the closure of 100 to 120 Kmart and Sears full-line stores.

The retailer reported a net loss of $2.40 billion or $22.63 per share for the fourth quarter, compared to net profit of $374 million or $3.43 per share in the prior-year quarter.

Loss from continuing operations was $2.39 billion or $22.47 per share, compared to profit of $374 million or $3.43 per share in the year-ago quarter.

The results for the latest quarter include about $1.9 billion of charges related to goodwill impairment, store closures and severance and other significant items.

Excluding items, adjusted earnings from continuing operations for the quarter plummeted to $58 million or $0.54 per share from $400 million or $3.67 per share in the year-ago quarter.

On average, 3 analysts polled by Thomson Reuters expected the company to report earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter decreased to $12.48 billion from $13.0 billion in the same quarter last year. Four Wall Street analysts' had a consensus revenue estimate of $12.44 billion for the quarter.

Gross margin declined 340 basis points to 24.5 percent and selling and administrative expense as a percentage of total revenues was up 230 basis points from last year.

In Thursday's regular trading session, SHLD is currently trading at $63.35, up $11.27 or 21.64 percent on a volume of 2.95 million shares. In the past 52-week period, the stock has been trading in a range of $28.89 to $87.69.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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