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Sears swings to profit in first quarter, pursues partial spinoff off of Sears Canada

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HOFFMAN ESTATES, Ill. — Sears Holdings posted net income of $189 million in the quarter, compared with a loss of $165 million in the prior-year period.

After several rounds of closings of Kmart and Sears full-line stores in the past months, revenues decreased $270 million to $9.3 billion for the quarter ended April 28. Domestic comp-store sales declined 1.3% -- 1.0% at Sears Domestic and 1.6% at Kmart. Sears also saw declines in its home appliances and consumer electronics categories.

But the company’s gross margin rate in 2012 improved 100 basis points over the prior year quarter, and CEO Lou D’Ambrosio described the results as “progress toward restoring profit growth and transforming our company."

D’Ambrosio pointed to the company’s three core priorities: financial and operational discipline, improvement of core retail operations, and a third priority that he described with this phrase: “leading customer-based innovation through integrated retail and an engaging membership program, Shop Your Way Rewards.”

Sears operates more than 3,900 full-line and specialty retail stores in the United States and Canada.

In a separate announcement, Sears Holdings said it plans to pursue a partial spinoff of its interest in Sears Canada.
The move will reduce the company's stake in Sears Canada from 95% to about 51%..

Sears said it expects Sears Canada to file documents with the Securities and Exchange Commission and the Canadian Securities administrators over the next few months with the expectation of completing the proposed spinoff during the 2012 calendar year.

Following the spinoff, Sears Canada will continue to be listed on the Toronto Stock Exchange.

Sears Holdings said it believes that the spinoff will permit each of Sears Canada and Holdings to focus on their respective businesses and allocate resources to best optimize returns on assets employed.

Sears Holdings expects to continue to include Sears Canada as a consolidated subsidiary in Sears Holdings' Consolidated Financial Statements following the spinoff.

The spinoff is subject to a number of conditions, including approval of securities filings by the board of directors of Sears Canada, review by the relevant securities regulators and final approval of the Holdings board of directors.