Sears to offer shareholders clues on business

Investors to look for details at shareholders' meeting on how Sears plans to reverse fortunes

Associated Press

NEW YORK (AP) -- The annual address from Sears Holdings Corp.'s reclusive chairman, Edward Lampert, set for Wednesday, is traditionally the highlight of the retailer's yearly shareholder's meeting outside Chicago.

This year, Lampert's comments come as Sears is seeking ways to generate cash and woo back disillusioned shoppers. In addition to Sears, Roebuck stores, the company operates Kmart and Land's End.

Sears' annual revenue has fallen 20 percent since 2006, and its adjusted earnings before interest, taxes, depreciation and amortization have fallen more than 90 percent. For its fiscal year that ended Jan. 28, Sears lost $3.14 billion on revenue of $41.5 billion, and the important yardstick of revenue at U.S. stores open at least a year fell 2.2 percent for the year. That's considered the best indicator of a retailer's health because it excludes stores that recently opened or closed.

The company faces increasing competition on all fronts, from Amazon.com to a stronger Wal-Mart Stores Inc., especially as Wal-Mart's U.S. business climbs out of a slump of more than two years.

But its latest financial report, released Tuesday, offers some glimmer of hope. The company said it expects to post a first-quarter profit thanks to a large gain from selling some U.S. and Canadian stores.

It expects earnings from continuing operations of $155 million to $195 million, or between $1.46 and $1.84 per share. That compares with a loss of $1.53 per share in last year's first quarter. Analysts polled by FactSet had predicted a loss of $1.69 per share. The company expects to formally report on its first quarter in mid-May.

Still, the company said consumer electronics sales were weak at both Sears and Kmart stores, and revenue at U.S. stores open at least a year fell 1.3 percent.

After suffering through a disastrous holiday season, Sears announced it would sell some stores and spin off others. It had earlier said it would close 100 to 120 of its roughly 4,000 stores in the U.S. and Canada. It sold 11 stores to General Growth Properties in April for $270 million.

It also has said it will cut inventory in its stores by $580 million and spin off of its smaller Hometown and Outlet stores as well as some hardware stores in a deal expected to raise up to $500 million. Its sale of the Orchard Supply Hardware chain closed in January. And in March, it said it will shutter three stores in major Canadian cities, affecting some 670 jobs.

Lampert hinted in his annual letter this year that these were visions of changes yet to come.

"We do not intend to sit idly by and have it be business as usual," Lampert wrote. "We will make the difficult decisions required to position Sears Holdings for the future and we will not accept such poor performance without making substantial adjustments."

In addition to Lambert, investors at the meeting Wednesday in Hoffman Estates, Ill., where Sears in based, will want to hear from CEO Lou D'Ambrosio. D'Ambrosio, who was CEO of communications company Avaya Inc. before joining Sears in February 2011, spent 16 years at IBM Corp. before that.

Investors have long speculated that Sears would sell its massive real estate holdings to generate cash. But industry watchers say that may not solve Sears' main problem: Its stores and merchandise just aren't very exciting.

Under D'Ambrosio, the company has invested several hundred million dollars in improving the customer experience. Changes include giving sales staff almost 15,000 iPads and iTouches so they can research products and help customers check out wherever they are in a store. It's also improving displays and adding more high-tech washing machines and other appliances. In 10 of its stores, it is responding to customer demands by dropping its clothing inventory in favor of offering more mattresses and recliners.

Sears' shares have fallen about one-fourth from their peak in mid-March around $83. But they rose more than 15 percent on Tuesday to close at $62.05, and they remain about twice as valuable as at the beginning of 2012.

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