NEW YORK (AP) — Sears Holdings Corp. is looking toward its substantial real estate portfolio to offset its weak financial performance.
The operator of Kmart, Sears and Land's End said Thursday it will spin off some stores and sell others as it seeks to regain profitability and market share.
The chain, led by billionaire Eddie Lampert, has faced slumping sales as consumers turn elsewhere for goods such as clothes and appliances. Investors have long speculated that Lampert's long-range plan could be to unlock the value of the company's massive real estate holdings.
Sears plans were well received by investors and shares rose 7 percent in morning trading.
The Hoffman Estates, Ill.-based company said will spin off its smaller Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400 million to $500 million. In a separate deal, Sears will sell 11 stores to the real estate company General Growth Properties for $270 million.
"We're executing actions to unlock the value of our portfolio and assets," said CEO Lou D'Ambrosio in a call with analysts. The plans follow news in December that the company would close at least 100 stores to raise cash.
Meanwhile, the Hoffman Estates, Ill.-based company reported it swung to a $2.4 billion loss in the fourth-quarter while revenue fell 4 percent to $12.48 billion. Adjusted earnings totaled 54 cents per share, below analyst expectations.
D'Ambrosio said results were "unacceptable."
"We know that and are taking immediate actions to address it," he said.
Results were hurt by high costs for cotton and fuel, too-high inventory, unseasonable weather that led to lower sales of winter gear and low consumer demand for two of its biggest categories, appliances and consumer electronics, the company said.
Sears also hasn't invested in its stores. Big box rivals like Wal-Mart and others typically spend anywhere from $6 to $8 per square foot on annual maintenance, which would including updating cash registers, replacing floor tiles and repainting, according to research firm International Strategy & Investment Group. But Sears over the past few years has only spent on average anywhere from $1.50 to $2.00.
Net loss for the three months ended Jan. 28 amounted to $22.47 per share. That compares with net income of $374 million, or $3.43 per share, a year ago.
Excluding a $2.5 billion in charges related to a required reserve related to deferred tax assets, impairment charges and costs related to close stores and severance, net income was 54 cents per share. Analysts expected much higher adjusted earnings of 76 cents per share.
Revenue fell 4 percent to $12.48 billion from $13 billion last year. Analysts expected $12.44 billion.
Revenue in U.S. stores open at least one year fell 4.1 percent during the quarter at Sears and 2.7 percent at Kmart. The measure is considered a key gauge of a retailer's financial health because it excludes stores that open or close during the year.
For the year, net loss totaled $3.1 billion, or $29.40 per share, compared with net income of $133 million, or $1.19 per share, a year earlier.
Revenue fell 3 percent to $41.57 billion from 442.66 billion a year ago.
Shares rose $7.42, or 14.3 percent, to $59.50 during morning trading. The stock had already been up 64 percent since the beginning of the year.