Today, the parent company of Sears, Roebuck & Co. and Kmart reported a $56 million loss for the quarter ended May 3. That was surprisingly bad, even taking into account the steep drop in earnings that had already been forecast. From earnings of $1.45 per share for first-quarter 2007, analysts expected the company to post an 89% decline to 15 cents per share.* Instead, the company posted a loss of 43 cents per share.
"Our first-quarter results reflect the difficult economic environment and intense competition for consumer business," said Bruce Johnson, Sears Holdings' interim CEO-president, in a statement.
During the quarter, sales at Sears' domestic stores open at least a year slumped 9.8%, while same-store sales dropped 7.1% at Kmart. Same-store sales declined across most of its major categories domestically, including the apparel, home appliance and lawn and garden segments. The company said weakness at its stores reflects the impact of rising gas and food prices on its consumers, as well as the weak housing market.
Measured media spending at Sears Holdings has declined 7% since 2005, according to TNS Media Intelligence, and seems poised to continue on a downward spiral, given the retailer's latest results. The company said it expects marketing costs for the remainder of the year to be lower than last year's.
The retailer also said that higher marketing and display costs contributed to a $70 million increase in selling and administrative expenses during the quarter. That was attributed to a reallocation of the retailer's annual budget into the first quarter. During the period, the company rolled out several major programs, including Sears' spring campaign, "Reimagine You." The multimedia blitz, on which the retailer teamed up with Hearst Magazines, ran from March through May. Y&R is Sears' creative agency, and DraftFCB is Kmart's agency of record. MPG handles media buying for both retailers.
LL Cool J: The new face of Sears
Separately, Sears said this week that it will be rolling out an exclusive clothing collection with LL Cool J this fall. In a release, Irv Neger, senior VP-Sears Apparel, said LL Cool J will become "the face of a new strengthened product portfolio at Sears."
Initially, the line will be carried in 450 stores, with plans for additional distribution by the holiday season. The line will span the juniors', kids' and young-men's categories, with plans to eventually expand into accessories.
"The collaboration between LL Cool J and Sears is the result of significant research on our part to choose an aspirational label that can be accessible to all," Mr. Neger said.
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Note: This paragraph has been updated to include earnings-per-share figures from 2007.