Weak sales, more promotions hurt Sears

By Dhanya Skariachan

Nov 21 (Reuters) - Sears Holdings Corp reported a wider quarterly net loss on Thursday after sales fell at both its namesake department stores and its Kmart discount chain and it invested in more promotions targeting rewards members.

The company is trying to engineer a turnaround. Sales have been falling since 2005, when hedge fund manager Edward Lampert merged the two U.S. chains in an $11 billion deal.

The net loss in the third quarter ended on Nov. 2 widened to $534 million, or $5.03 a share, from $498 million, or $4.70 a share, a year earlier.

Excluding severance costs, tax-related adjustments and a pension expense, the loss was $2.88 a share.

Sales fell 6.7 percent to $8.3 billion, missing the analysts' average estimate of $8.9 billion, according to Thomson Reuters I/B/E/S.

Sears has been closing stores, tightly managing inventory, selling real estate and shedding assets, but the retailer is still struggling to generate cash from its operations.

Wall Street has criticized Lampert for not investing enough in stores and for relying on financial engineering to boost profits. On Thursday, he said Sears was spending more to make targeted offers to members of its Shop Your Way rewards program. He said 70 percent of sales are now made to Shop Your Way members.

Sales at stores open at least a year fell 3.1 percent, including a decline of 2.1 percent at Kmart. At that chain, weak demand for groceries, consumer electronics and toys offset strength in the apparel and "seasonal and outdoor living" categories.

A 4 percent drop at Sears Domestic reflects decreases in most categories, including the consumer electronics, lawn and garden, tools, home appliances and apparel.

At the end of the quarter, total debt was $4.7 billion.

The Hoffman Estates, Illinois-based company recently refinanced some debt, sold its stake in eight properties it owns with the Westcliff Group and terminated some store leases in Canada. It said it was on track to generate $2 billion of liquidity during the fiscal year.

On his own and through his ESL Investments hedge fund, Lampert holds about 55.34 percent of Sears stock, according to the latest U.S. securities filings.