Sears Holdings posts small quarterly loss

CHICAGO — The inaugural quarterly results from newly merged Sears Holdings Corp. didn't impress investors, who sent its stock tumbling Tuesday after the nation's No. 3 retailer posted a small first-quarter loss amid still-sluggish sales at Kmart and Sears stores.

Sears Holdings, created through Kmart Holding Corp.'s March 24 acquisition of Sears, Roebuck and Co., reported a $9 million loss, or 7 cents a share, for the February-April period.

The results include a $90 million charge related to a change in how Sears accounts for certain inventory costs. Without the charge, the company reported a profit of $81 million, or 65 cents per share.

The results sent Sears shares falling $13.41, or 8.7 percent, to close at $141.50 Tuesday on the Nasdaq Stock Market, still near the high end of a 52-week range of $51.80 to $158.90.

Some analysts said investors likely were unhappy about Sears inability to grow sales at its existing Kmart and Sears locations.

Kmart's same-store sales, or sales at stores open at least one year, fell 3.7 percent on lower demand for seasonal items stemming from bad weather this spring. Same-store sales at U.S. Sears store fell 3.1 percent.

"On the battlefield of gaining and losing customers, they're losing as a retailer," said retail consultant Howard Davidowitz, chairman of New York-based Davidowitz & Associates.

"You cannot continue to lose market share and survive in retailing," Davidowitz said.

Sears Chairman Edward Lampert seemed to refute that notion in a message to shareholders Tuesday. He said the newly formed Sears Holdings is willing to forgo market-share gains in favor of "creating value" through improved cash flow and strategic acquisitions, for example.

"In the past, too often our predecessor companies pursued higher sales and accepted lower profits to meet objectives that, we believe, did not increase the value of the companies," Lampert said.

There are early signs that the same strategies Lampert used to lift Kmart out of Chapter 11 bankruptcy — such as cutting costs and improving cash flow — already are showing up at U.S. Sears stores, said independent retail analyst Richard Hastings.

Hastings called the performance at Sears stores "a nice turnaround despite tough weather conditions." He also pointed out that Kmart's 3.7 percent slide in same-store sales was a big improvement over the 12.9 percent drop from a year earlier.

Still, without growing market share, Sears will have a tough time competing against retailers like Target Corp. and J.C. Penney Co. Inc., which post consistent same-store sales growth, said Morningstar analyst Kim Picciola.

"If you don't have customers coming into your doors, it makes it really difficult to improve your bottom line."

Both Sears Holdings and analysts said the quarter's performance offers a limited view of how well the nascent marriage of two faded retail icons is faring. The results included Kmart's full performance for the 13-week period but included only the five weeks of results from Sears stores following the $12.3 billion merger.