HOFFMAN ESTATES, Ill. — "Integrated retail" was the dominant theme as executives discussed Kmart operator Sears Holdings' plans to restore confidence in the company after a fourth quarter 2011 that even the company's chief executive called "unacceptable" during an earnings call Thursday.
"Our fourth-quarter earnings were unacceptable," president and CEO Lou D'Ambrosio told investors and analysts. "We know that and are taking immediate actions to address it." D'Ambrosio said the actions would include cost reductions to improve financial performance, actions to improve productivity and hiring new talent to bolster the company's merchandising and leadership teams. The cost reductions include plans, also announced Thursday, to sell 11 Sears stores to General Growth Properties for $270 million; the stores will continue operating as Sears stores into next year, with plans to announce final closing dates later this year.
The company also will separate its Sears Hometown and Outlet businesses, as well as some hardware stores, through a proposed rights offering, which it expects to raise $400 million to $500 million. Other plans include the introduction of a new casual clothing line at Kmart directed at men ages 25 years to 35 years, announced by new chief merchant and president for the Kmart and Sears formats Ron Boire. "I joined Sears because I felt the company had enormous, untapped potential," Boire said during the call.
In addition, D'Ambrosio hinted at greater use of technology in stores in order to create a more interactive customer experience as part of the company's integrated retail plans. "We believe the retailers who best use technology to integrate the customer experience across all channels will be the ones who win," he said.
The call was a rarity for the company, which despite its iconic status in American culture, continued presence as a major retailer and ownership of several still-popular consumer product brands has experienced a steep decline as more successful competitors like Target and Walmart have expanded. "We're prepared to take whatever steps are necessary, from cost reductions and operational improvements to active portfolio management, to deliver an acceleration of our strategic initiatives to restore our company to greatness and deliver attractive returns to our shareholders," D'Ambrosio said.
Kmart comps declined 2.7% for the quarter and 1.4% for the year, with sales of $4.84 billion for the quarter and $11.8 billion for the year, compared with $4.9 billion for fourth quarter 2010 and $11.75 billion for fiscal 2010. Sears Holdings as a whole reported sales of $12.48 billion in fourth quarter 2011 and $41.56 billion in fiscal 2011, compared with $13 billion in fourth quarter 2010 and $42.6 billion in fiscal 2010. The company recorded a net loss of $2.4 billion for the quarter and $3.1 billion for fiscal 2011, compared with a profit of $374 million for fourth quarter 2010 and $122 million for fiscal 2010. The company operated 1,305 Kmart stores, compared with 1,307 last year.