Sears CEO Eddie Lampert admitted the retailer had a “tough-to-terrible” holiday season, but insisted the company’s strategy was a model for other chains.
“I believe the entire retail industry is headed to where we already are,” Lampert wrote in a Thursday letter to shareholders — a message that many might find chilling, given Sears’ increasingly disastrous results.
Sears was slammed by a fourth-quarter loss of $358 million as revenue sank 14 percent, to $10.6 billion.
The company narrowed the loss from $489 million a year earlier, but did so by selling off assets.
This year, the owner of Sears and Kmart aims to raise $1 billion in cash by selling off still more of its properties, including Lands’ End. Sears said Thursday it expects to complete the Lands’ End spinoff in May, and that it will reap a $500 million dividend from the transaction.
The trouble with that plan, critics say, is that Lands’ End is the company’s most profitable remaining unit, generating about $150 million in Ebitda, or earnings before interest, taxes, depreciation and amortization.
“As we have asked on previous occasions and will ask again, what is the longer term game plan[?]” Credit Suisse analyst Gary Balter asked in a Thursday research note. “Sears is a long way from being cash flow positive.”
Sears continues to hemorrhage cash as the company’s stores nationwide have steadily lost shoppers. Critics note that the stores have become increasingly dilapidated, as Lampert refuses to inject cash on remodeling.
In his Thursday letter, Lampert pooh-poohed the idea that “what our stores need most are hundreds of millions of dollars more in décor and fixtures.”
Instead, Lampert insisted that the company focus on its e-commerce strategy and rewards program, despite the fact that they still comprise a tiny fraction of Sears’s business.
Sears shares on Thursday rose 6.5 percent to $43.01, goosed partly by signals from the company that February sales have taken a rare step into positive territory following the fourth-quarter drops.
“It is hard to fathom why the stock should rise from very overvalued levels to even higher overvalued levels,” Balter said. “However, markets reflect supply and demand,” he added, noting that supply has been constricted by short selling.