By John Jannarone
At the end of this year's annual letter, Sears Holdings Chairman Edward Lampert thanked shareholders for their "patience and trust." Unfortunately, they may need a lot more of it.
Sears shares fell 9.9% Tuesday on a first-quarter update. The retailer, which includes the Sears and Kmart brands, saw sales at domestic stores open at least a year decline 3.6%. While worse than consensus expectations for department stores Kohl's and J.C. Penney, it is hardly a change of pace. Domestic same-store sales at the Sears brand have declined every year in the past decade.
The bigger worry is that sales declines are preventing Sears from turning a profit. The company expects to lose between $1.35 and $1.81 a share in the April quarter, against previous consensus estimates of a three-cent profit.
Since taking over in 2005, Mr. Lampert has tried to reduce expenses. That helps compensate for weaker sales, and the company continues to buy back shares. But the strategy has likely made shopping at Sears less appealing and prevented the company from joining the sales recovery alongside rivals.
A rare bright spot for Sears is a 22.4% increase in online sales during the quarter. Yet that only added 0.5 percentage point to the domestic same-store sales figure.
Unless Sears comes through with a bumper Christmas, even Mr. Lampert's remaining disciples will have their faith tested.
