Sears Reports Surprising Loss in First Quarter 2011

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Sales in the first quarter fell 3.4% to $9.71 billion. (Image: Ilker)
Sales in the first quarter fell 3.4% to $9.71 billion. (Image: Ilker)

FINANCE

  • Sears reported an unexpected loss in sales, falling 3.4%
  • Poor customer service is blamed on the decreased sales
  • Kmart sales fell by 1.6%

Sears reported a larger than expected quarterly loss, which is blamed on the company's focus on cutting costs and increasing profit - rather than a focus on providing a better combination of merchandise and an improved shopping experience for its customers.

Sales in the first quarter fell 3.4% to $9.71 billion.

The customer service problems that are blamed for the loss of sales at Sears include closed cash registers for servicing customers, poor signage, understaffing at stores and inconsistent inventory, says an  analyst at Credit Suisse. Customer traffic in Sears has been dwindling daily, the source added.

According to Reuters, sales at Sears have been falling yearly since it merged with Kmart in 2005. Sales at Sears Canada Inc. had a large quarterly loss, with a 9.2% decline in same-store sales, according to Thomas Reuters data. Sears controls a 92.4% stake in Sears Canada.

Poor Quarter for Sears

The store reported a net loss of $170 million, which is $1.58 per share for the quarter that ended on April 30.

In the previous year, the company reported a net profit of $16 million, which was a profit of 14 cents per share. The loss that Sears experienced in the first quarter of 2011 was equivalent to about $1.39 a share, not including one-time items.

Analysts had predicted that the loss would be about $1.22 per share, reported Thomson Reuters.

In early May Sears had predicted losses to be between $1.35 to $1.81 a share after a 3.6% loss in sales at stores in the United States. Sales for Sears-brand products fell by 5.2% and Kmart sales fell by 1.6%.

Sears and rivals Home Depot and Lowes Cos Inc have also experienced reduced sales after an American stimulus program aimed at prompting customers to buy energy efficient appliances ended in 2010.

Spring sales for Sears were also hurt by lower than normal temperatures in the spring and increased rain and snow in other parts of the United States, which is the main market for Sears stores and its Kmart chain.

Key Statistics – US Retail Market (source: ICD Research)

  • Specialty retailers have a market share of about 42% in 2010 and general retailers have a market share of about 40% in the United States retail industry.
  • Online retailers have a compound annual growth rate of 15.8%. These retailers were the fastest growing retail division in 2010.
  • About 14 million people were employed in the U.S. retail industry since April, 2010, according to the Bureau of Labor Statistics.

By C. Williams for
C. Williams is a journalist based in the United States. She has been covering the news for over a decade.

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