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Sears Holdings 4th-quarter loss narrows as company reduces inventory and expenses

HOFFMAN ESTATES, Ill. – Sears posted a smaller loss in the fourth quarter as it reduced its inventory and expenses while sales at its namesake stores rose slightly.

The retailer’s stock climbed more than 3 per cent in premarket trading on Thursday.

The company that also owns the Kmart store chain lost $489 million, or $4.61 per share, for the period ended Feb. 2. That compares with a loss of $2.4 billion, or $22.63 per share, a year earlier.

Excluding certain items, earnings from continuing operations were $1.12 per share.

Revenue fell 2 per cent to $12.26 billion from $12.48 billion. Sears said this was mostly due to the separation of its Sears Hometown and Outlet businesses; the impact of having fewer Kmart and Sears stores in operation and lower revenue from stores open at least a year. This was somewhat offset by having an extra week in the period.

Revenue at U.S. stores open at least a year dropped 1.6 per cent in the quarter.

This metric is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.

Revenue at domestic Sears stores open at least a year edged up 0.8 per cent, helped by strength in the clothing, home appliance and home categories. The figure dropped 3.7 per cent for Kmart locations and fell 3.8 per cent for Sears Canada.

A good part of the drag on results was softness in consumer electronics. Removing this category, total revenue at U.S. stores open at least a year dipped 0.2 per cent while Sears rose 2.4 per cent and Kmart declined 2.5 per cent.

Like many retailers, Sears Holdings Corp. saw growth in its online business, with sales climbing 25 per cent.

Edward Lampert, chairman and CEO of the Hoffman Estates, Ill., company, said in a statement that Sears has invested significantly in its online operations as well as its rewards program and the technology needed to support the two initiatives.

Total costs and expenses declined to $12.88 billion from $13.18 billion.

Merchandise inventories at quarter’s end were $7.6 billion compared with $8.4 billion a year earlier. Domestic inventory dropped $895 million to $6.8 billion.

Chief Financial Officer Rob Schriesheim said that Sears anticipates lowering its 2013 peak domestic inventory by $500 million from the $8.6 billion level at the end of the third quarter of 2012.

Total debt at quarter’s end was $3.1 billion. This is down from $3.5 billion in the prior-year period.

Shares of Sears gained $1.53, or 3.2 per cent, to $49 two hours before the market open.

For the full year, Sears lost $930 million, or $8.78 per share. In the prior year it lost $3.14 billion, or $29.40 per share.

The company’s adjusted loss from continuing operations was $2.03 per share.

Annual revenue fell 4 per cent to $39.85 billion from $41.57 billion.

Sears has more than 2,500 stores in the U.S. and Canada.