Associated Press | Sears Holdings Corp.’s first-quarter net income fell 38 percent on
thinner profit margins at its Sears chain, squeezed by discounts on
appliances.
The discounts offset a turnaround in revenue at the retailers’ Sears
and Kmart stores, breaking a long string of declines at Sears stores.
It was Kmart’s third consecutive quarter of rising revenue at stores
open at least a year.
Sears Holdings Corp., which is led by financier Chairman Edward Lampert, said Thursday its net income fell to $16 million, or 14 cents per share, in the quarter ending May 1, down from $26 million, or 21 cents per share, a year earlier.
The thinner profit margins are a blow to a company that has posted rising net income in recent quarters, a result of closing stores and slashing expenses.
Revenue fell slightly to $10.046 billion from $10.055 billion a year ago because the company has 63 fewer stores than in last year’s first quarter.
Analysts expected the company, based in Hoffman Estates, Ill. to report profit of 14 cents per share on revenue of $10.21 billion.
Sears stores’ 1.2 percent gain in revenue at stores open at least a year was fueled by appliance purchases under the government’s cash for appliances program, which offers rebates on energy-efficient items.
The appliance program could fuel Sears’ second quarter as well, because the company said much of the revenue for appliance sales in April won’t be booked until the items are delivered in that quarter.
Kmart’s revenue at stores open at least a year rose 1.7 percent, driven by increases in clothing, home items and toys. That figure is considered an important measure of a retailers’ health because it excludes the effects of new stores and closings.
Based in Hoffman Estates, the retailer’s portfolio also includes mail-order and online retailer Lands’ End and popular brands like Craftsman, Diehard and Kenmore.
Sears plans to focus on its long-struggling clothing business in hopes of attracting new and younger shoppers, officials told investors at the shareholders’ meeting. Executives say clothing has been an “Achilles heel” for Sears.
The company will add a line of trendier clothing to Lands’ End, which also has its own stores and is an increasing presence inside Sears stores, to draw younger customers as well as a line of store-brand products at Kmart.
It also plans to reinvent much of its Kenmore line of appliances, expand layaway at both Sears and Kmart and even add more high-end fitness equipment at Sears.
“It also plans to reinvent much of its Kenmore line of appliances, expand layaway at both Sears and Kmart and even add more high-end fitness equipment at Sears. ” Sure, put I-phones in the washing machines, another indispensible ‘feature’. High end fitness equipment? At what price point, Wal-Mart level? It will be interesting to see if the typical SearsMart shopper is willing to pay more for heavy-duty, proper equipment. The revenue fall due to appliance discounting offers some clue. Or maybe the plan is to sell cheap made in china knock-offs of what little made in USA, quality products remain.
What Sears needs is to give shoppers a reason to shop at Sears.
Why should I buy a Kenmore brand appliance when (1) I can probably get a real brand name (not store brand) appliance for less elsehwhere, and (2) if I buy a Kenmore, I’ll be captive to Sears if/when I need it repaired?
Why would I buy clothing at Sears when I can get something just as good for less at a discount store? Surely, no one associates Sears with stylish clothing?
Why should I buy Craftsman brand tools when I can get the same quality for less elsewhere?
Sears needs to provide shoppers with a reason to buy from Sears. Presently, the Sears narrative seems to be, “we sell discount store quality at a higher price.”