Sears stumbles in 2Q, retail stores remain company's biggest albatross

Sears Holdings Inc. recorded a hefty second-quarter loss Thursday on another sales slump, raising more concerns about the future of a company that once was a staple of American shopping.

The company, which operates Sears and Kmart, said it plans to do more cost-cutting to right the ship. That includes closing more stores beyond the 130 that it had announced earlier this year.

But investors weren't encouraged. They sent shares down 4 percent in premarket trading.

Sears, controlled by billionaire hedge fund investor Edward Lampert, lost $573 million, or $5.39 per share, for the period ended Aug. 2. That's more than double the loss of $194 million, or $1.83 per share, a year earlier. It marked its ninth straight quarterly loss.

Revenue declined 10 percent to $8 billion from $8.87 billion. One bright spot was online and multi-channel sales, which increased 18 percent.

The challenges facing CEO and Chairman Lampert are enormous. The company has been cutting costs, reducing inventory and selling assets to return to profitability.

At the same time, it's shifting its focus on running a store network to operating a member-focused business called Shop Your Way. But its biggest albatross remains its stores, which have been criticized for being outdated and shabby.

Lampert, a billionaire hedge fund investor, combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. But it has faced mounting pressure from nimbler rivals like Wal-Mart Stores and Home Depot.

Sears is also facing broader issues that are tripping up many other retailers. Like other stores catering to the low- to middle-income customers, Sears is grappling with a slowly recovering economy that's not benefiting all Americans equally. It also is wrestling with shoppers' shift away from physical stores to PCs and mobile devices for shopping and research.

Lampert said in a statement that the second-quarter performance was unacceptable even though he also said the chain has showed progress.

"I am personally committed to investing in and driving our transformation, improving the profit performance of the company, ensuring our financial flexibility, all while creating shareholder value," said Lampert in a prerecorded call.

Sears said it is still looking at options to sell its auto center business and Sears Canada operations. It recently spun off clothing business Lands' Ends as a separate public company.

Sears also said it plans to improve pricing and promotions. And it said will continue to invest in its member-focused business called Shop Your Way where members receive incentives like extra discounts.

Sales to Shop Your Way members climbed to 73 percent of eligible sales, compared with 71 percent a year earlier.

Sales at Kmart stores open at least a year fell 1.7 percent.

At Sears locations, the figure edged up 0.1 percent. Sales at stores open at least a year is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

Its stock declined $1.44 cents to $34.51 in premarket trading.