Sears Chairman Rallies Investors
After Drop in Profit, Lampert Outlines Comeback Strategy
Snowblowers are lined up in front of the Sears store in Berlin, Vt., in this Nov. 29, 2007 file photo. Department store chain Sears Holdings Corp. said its fourth-quarter profit tumbled 47 percent because of continued poor performance at its Kmart and U.S. Sears stores. (AP Photo/Toby Talbot, file)
(Toby Talbot - AP)
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Friday, February 29, 2008
Sears Holdings Chairman Edward S. Lampert is invoking Eli Manning, the once-maligned New York Giants quarterback turned Super Bowl hero, to inspire investors unhappy with a 45 percent drop in profit in the past 12 months.
Manning "did not give up or lose heart," Lampert wrote to shareholders in a letter accompanying the retailer's fourth-quarter profit report yesterday. "Like Eli Manning, we know what it's like to be underestimated and questioned."
Profit dropped 47 percent, to $426 million, in the three months ended Feb. 2, the company said. Revenue fell 6.8 percent, to $15.07 billion. Lampert attributed the plunge to a crumbling housing market and company missteps.
Sales at stores open at least a year fell 4 percent at Sears stores and 5.2 percent at Kmart, for a total of 4.5 percent company-wide, led by declines in purchases of appliances and clothing. Annual profit was $826 million. Revenue fell 4.4 percent compared with a year earlier, to $50.7 billion. Shares dropped 20 cents, or 0.2 percent, to $101.40.
Sears announced a reorganization last month to revive sales as consumers burdened by higher fuel, food and mortgage costs cut spending or shopped elsewhere. The retailer has posted declining revenue in stores open at least a year in every quarter since Lampert combined the Sears, Roebuck and Kmart chains in 2005.
The company has 3,800 stores in the United States and Canada.
Lampert said the company's focus in 2008 would be on increasing profitability as consumer demand weakens on the decline in the U.S. housing market and rising prices for food and fuel.
"Our profit margins continue to lag our competitors," Lampert wrote. "We intend to manage the company's expenses and our inventory position more tightly in 2008."
In the shareholders' letter, Lampert raised the possibility that Sears could sell some of its brand-name products, which include Craftsman tools and Kenmore appliances, through other retailers.
Lampert said Manning's comeback story "reminds me of what we went through a few years ago with Kmart." Kmart had been "given up for dead," Lampert said, but it returned to profitability in 2004.
Lampert, the hedge-fund manager who brought Kmart Holding out of bankruptcy in 2003, engineered the discount retailer's $12.3 billion acquisition of Sears, Roebuck less than two years later and took the Sears name for the whole company. His funds hold 48 percent of the retailer, according to Bloomberg data.
Despite his invocation of the Giants, "I am actually a lifelong fan of the New York Jets," Lampert said. The Jets lost 12 of their 16 games last season.
