Sears Posts Loss on Sales Drop, Accounting Shift

Sears, Roebuck & Co. had a first-quarter loss of $859 million, its biggest in more than a decade, after clothing sales declined and the retailer changed the way it accounted for pension costs.

The net loss of $3.90 a share contrasts with net income of $192 million, or 60 cents, a year earlier. Revenue fell 12% to $7.79 billion because of the sale of its credit card unit and the National Tire & Battery chain, the Hoffman Estates, Ill.-based company said.

A change in accounting widened the loss by $3.81 a share as Sears phases out its pension plan to compete with retailers such as Wal-Mart Stores Inc. that offer less-costly employee benefits.

Chief Executive Alan Lacy’s 2002 purchase of Lands’ End hasn’t stemmed declines in clothing sales. Lacy, 50, said Sears didn’t order enough apparel last quarter and waited too long to put out spring fashions.

“Sears is going to have a difficult time keeping up,” said Bonnie Baha of TCW Group Inc.

Sears expects net income of 78 cents to 83 cents a share in the current quarter. Analysts were expecting a profit of 77 cents, according to a survey by Thomson First Call. Sears reported second-quarter net income of $1.04 a share last year.

Shares of Sears rose 44 cents to $42.14 on the New York Stock Exchange. They have declined 7.4% this year.

Excluding the accounting change, the company had a loss of 9 cents a share. On that basis, analysts had expected Sears to have a loss of 10 cents, according to Thomson First Call.

Sears in November sold the credit unit to Citigroup Inc. for $31.8 billion, including $10.4 billion in securitized debt, after delinquencies rose.

Sales at stores open at least a year rose 1.6%, the second increase in 13 quarters, after Lacy dropped some unprofitable clothing lines. Recent sales gains have trailed those of rivals including J.C. Penney Co.

Sears is more dependent on the stores, as well as services such as dishwasher installation, after selling the credit card unit, which had accounted for more than half the profit.

The company plans to add a Structure men’s clothing line, and will sell Jones Apparel Group Inc.’s new A-Line women’s line exclusively at some stores in the fall. Sears will also begin offering shoes and sweaters on its Sears.com Internet site.