Hoffman Estates, June 8—-Sears Holdings posted a loss in its fiscal first quarter. The company said that retail sales tumbled as consumers shunned lawn and garden goods and lightweight apparel because of soggy and chilly weather. What's more, construction to turn certain Kmart stores into Sears Essential stores has weakened sales.
For the quarter, Sears reported a loss of $9 million, or 7 cents a share. The results were hurt by a $90 million charge, or 72 cents a share, from accounting changes, which the company said it made to provide a better measurement of operating results.
Excluding the accounting changes, earnings fell to $81 million, or 65 cents a share, from 94 cents a share a year ago. Revenue rose to $7.63 billion from $4.63 billion, the company said.
The results for the first quarter include approximately five weeks of Sears results and 13 weeks of Kmart's results.
Sales at stores open longer than a year, an important industry measure, fell 3.7% at Kmart stores and 3.1% at Sears' domestic stores.
Sears Holdings said the merger with Kmart swelled total revenue and expenses significantly from the year-ago period.
But in a letter to shareholders, chairman Edward Lampert said the company has instituted a new policy of checks and balances on spending that he expects will keep costs in line.
"We are encouraging our employees to do more with less and to treat the company's money as they would their own," he wrote.
The letter was Lampert's only contact with other shareholders or analysts. Because the board controls more than 40% of the company's outstanding shares -- the biggest chunk of which are Lampert's -- the chairman said "this will be the primary way we communicate with shareholders" as he chisels out a management culture that is heavy on ownership.
The company ended the quarter with $1.6 billion in cash and cash equivalents -- substantially less cash than the $7.4 billion it was sitting on at the start of the quarter. However, $5.4 billion was paid out to Sears shareholders and option holders in connection with the purchase of Kmart and for a $346 million debt payoff.
In his missive to shareholders, Lampert said he would "opportunistically pursue" investments in and acquisitions of other companies for growth. Besides the $1.6 billion in cash, he has a $4 billion line of credit.
Lampert wants the company to be "learning" organization with a flat structure that fosters communication. "This will require organizational and behavioral change," he said, acknowledging that he's got a steep mountain of top-on-down culture to change. "But I am personally committed to building a responsive and nimble organization and insisting upon an open-minded learning culture."
The chairman also indicated that integrating the two companies and their product lines will be challenging as he attempts to put Kenmore and Craftsman products into Kmart stores, for example.
"We will evaluate the success of these investments and make adjustments quickly as we learn from the customer reaction and financial results of their performance," he added.
