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Sears Holding Corp. may need to go back to the drawing board. The company's dependence on appliances and what seemed to be growing strength at its Kmart stores failed it in the first quarter, as the retailer reported a bigger-than-expected loss in contrast to a profit a year ago.
The company led by billionaire Edward Lampert has long seen customers drawn to the value of its appliances, under brands such as Kenmore. But the absence of a government appliance rebate program took a bite out of its performance.
On Thursday, Sears reported a net loss of $170 million, or $1.58 per share, in the quarter ended April 30 compared with net income of $16 million, or 14 cents per share, a year earlier. The adjusted loss was $1.39 per share.
Analysts surveyed by FactSet predicted a smaller loss of 99 cents per share.
Sears had cautioned earlier this month that it would post a bigger-than-expected first-quarter loss due mainly to a drop in appliance, clothing and consumer electronic sales.
But the results are still a disappointment, particularly at Kmart, which had recently been the bright spot within the company's struggling business.
Revenue at Kmart stores open at least a year fell 1.6 percent in the quarter mostly because of fewer sales in the food and consumables and pharmacy categories. At Sears' domestic stores, the figure dropped 5.2 percent on declining sales of appliances, clothing and consumer electronics.
Total revenue from domestic stores open at least a year slipped 3.6 percent.
This metric is a key gauge of a retailer's health because it excludes results from stores opened or closed during the year.
Sears, which is based in Hoffman Estates, Ill., said its overall revenue fell 3 percent to $9.71 billion in part because of the weak results from its domestic stores, as well as having fewer Kmart and Sears stores open. The company also reported a 9.2 percent drop in revenue from Sears stores in Canada open at least a year.
The results also fell shy of the $9.73 billion that analysts expected.
President and CEO Lou D'Ambrosio, who was named to the company's top spot in February, said in a statement that bad weather, economic pressures and the absence of the appliance rebate program hurt Sears' performance.
But D'Ambrosio admitted that the company could have done a better job internally.
"We cannot control the weather or economy or government spending. But we can control how we execute and leverage the potent set of assets we have," he said.
Sears, whose other brands include DieHard and Craftsman, also announced 10 days ago that it is considering a possible move of its headquarters. State and local incentives it receives expire next year.
The company has more than 4,000 stores in the U.S. and Canada.