As loss widens for Sears, Lampert offers laundry list of reasons

With another downwardly mobile quarter in the pocket for Sears Holdings, chairman Eddie Lampert is qualifying the company's plight on a number of external forces.

In an open letter to shareholders, Lampert said that Sears doesn't deserve the flak it gets when upstart companies like Amazon, Tesla and Uber are not criticized for losing money.



"Because of Sears and Kmart's longstanding history and cultural impact, we are targeted for criticism when our results are poor," he wrote. "But it is unfair to evaluate our approach through the rearview mirror without acknowledging the changing circumstances in our industry as well as our bold attempts to change the way we do business to meet this changing reality."

Lampert added that moves to increase the minimum wage, as well as disparate tax rules for online retailers, has made it especially challenging for apparel retailers to remain competitive.

"We are now seeing more and more retail stores shut down and the tax base of many municipalities eroding due to the hollowing out of the sales tax base," he wrote.

The impact of an unusually mild winter was also to blame, which Lampert pointed out had "a cascading effect on many retailers, leading to reduced spending and heavy discounting on winter clothing and related items."

Net loss widened for Sears in the fourth quarter ended Jan. 30, increasing to $580 million from the previous year's loss of $159 million.

Meanwhile, revenues were down 9.9% to $7.3 billion from $8.1 billion in the year-ago period.

Additionally, Kmart and Sears Domestic comparable store sales were down 7.2% and 6.9%, respectively, in the fourth quarter -- an improvement from the trend displayed in the first three quarters of 2015, according to the company.

Another silver lining is that the company reduced its net debt position by about $1.0 billion from the year-ago period.

"While our fourth quarter comparable store sales were improved over the prior three quarters and January 2016 was our best monthly comparable store sales performance of the year (-4.5%), the unseasonably warm weather and the associated competitive promotional environment resulted in higher than expected markdowns and significantly lower gross margin in our key apparel categories," said Lampert.

"The impact on our margin rate from the highly promotional environment had a greater impact than the comparable store sales improvements," he added. "As we head into 2016, we remain committed to restoring Sears Holdings to profitability. Generating positive Adjusted EBITDA is our most important area of focus, and to that end, we plan to accelerate our transformation into a leading member-centric integrated retailer and take action, where necessary, to optimize our cost structure and improve our gross margin realization."

For the full year, revenues were down 19.6% to $25.1 billion, but the company did close the gap a little in terms of net loss: $1.1 billion this year compared to 2014's loss of $1.7 billion.

Lampert acknowledged the need for "significant improvement" in the apparel business, which will be a priority for the company heading into 2016.