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Profits slide at Sears

Warm weather and worried consumers combined to send operating profits tumbling at US retail giant Sears, slipping from US$276 million to US$46m (£134m to £22m) for the third quarter to November 3.
Sears Holdings Corporation, which owns both the Kmart general merchandise chain and the Sears department store and home shopping businesses, said its total domestic like-for-like sales had fallen 4.6% over the period. Sales at Sears Domestic, which excludes Canadian stores, declined 4.2%, with Kmart falling 5%. Total sales were down US$400m (£193m) to US$11.5 billion (£5.5bn).

The group blamed the poor performance on a combination of increased competition, the weak housing market and consumer credit woes. Clothing was particularly affected by unseasonably warm weather.

However, trading at the chain improved slightly in November, with group domestic like-for-like sales down 0.4%, and Sears’ domestic sales rising by 1.9%.

Sears sells a mix of own labels including Lands’ End, Jaclyn Smith and Joe Boxer, as well as some outside brands such as Levi’s and Adidas.
“We are very disappointed in our performance in the third quarter,” said Sears Holdings chief executive Aylwin Lewis. “We have much to improve and are working hard to do so.”

Lewis added that despite the slump in profits, the company was cash generative and that it was continuing to invest in its customer relationships, multi-channel proposition and information technology systems. The retailer believes sales and gross margin for the rest of this financial year will continue to be affected by unfavourable economic conditions.

Sears is one of a number of US retailers to report poor results for the quarter. Three weeks ago, clothing and homewares retailer JC Penney reported that operating profits had fallen 18.5% to US$411m (£199m), with sales weakening dramatically in September and October.

Department store operator Kohl’s also hit the buffers, with like-for-like store sales falling 2.6% for the quarter to November 3. Operating profits declined 10.4% to US$330.9m (£160m) on sales of US$3.8bn (£1.8bn).

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