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Sears Holdings' Q3 Loss Widens

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Sears Holdings Corporation reported third-quarter fiscal 2013 adjusted loss per share of $2.88 per share, substantially widening from the year-ago quarter loss per share of $2.07. Including special items, the company's reported loss reached $5.03 per share compared with a loss per share of $4.70 in the prior-year period.

Quarterly Details

Revenues declined 6.6% to $8,272 million compared with $8,857 million in the year-ago quarter, primarily due to separation of Sears Hometown and Outlet business, reduction in the number of Kmart and Sears' full-line stores in operation and lower comparable store sales.

Segment-wise, sales at Sears Domestic fell 6.5% to $4,419 million, while Kmart sales declined 5.4% to $2,916 million. Moreover, sales at Sears Canada registered a decline of 10.9% to $937 million.

The company witnessed a 3.1% decline in domestic comparable store sales, comprising a 2.1% fall at Kmart stores and 4.0% fall at Sears Domestic. The comparable store sales decline at Kmart stores was due to weak performances in the transactional categories with grocery & household, drugstore and consumer electronics as well as toys being the prominent ones. The apparel and seasonal & outdoor living categories witnessed improvement in comps during the quarter.

Comps at Sears Domestic mostly suffered due to weak performance at the consumer electronics, lawn & garden tools, home appliances, apparel categories and Sears Auto Centers. The segment’s sales of home category improved year over year.

Adjusted gross profit declined 10.5% to $1,944 million compared with $2,172 million reported in the third quarter of fiscal 2012. Consequently, gross profit margin contracted 100 basis points to 23.5%. The company's adjusted selling and administrative expenses declined 4.9% to $2,230 million from $2,344 million.

Adjusted loss before interest, tax and depreciation in third-quarter fiscal 2013 was $286 million, substantially higher than the year-ago comparable quarter figure of $172 million. Adjusted operating loss came in at $443 million, as against a loss of $358 million in the year-ago quarter.

Balance Sheet and Cash Flow

Sears Holdings ended the quarter with cash and cash equivalents (including restricted cash) of $607 million and long-term debt and capitalized lease obligations of $2,862 million, compared with a cash balance of $633 million and long-term debt and capitalized lease obligations of $1,960 million at the end of the year-ago quarter. The company's shareholder equity was $2,327 million as of Nov 2, 2013.

Other Stocks to Consider

Sears Holdings currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Big Lots Inc. (BIG - Free Report) , Dollar Tree, Inc. (DLTR - Free Report) and PriceSmart Inc. (PSMT - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).

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