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Sears Posts Major Losses, Continues “Dangerous Downward Spiral”

Not even the most hale of Sears’ boosters expected the embattled company to flourish in the second quarter, but the numbers paint a surprisingly grim picture of a flatlining empire. The retailer reported a net loss of $194 million, compared to $132 million at the same time last year. Revenues plunged 6.3% to $8.87 billion from $9.47 billion.

The formerly dominant market leader posted a loss $1.70 per share versus the prevailing Wall Street expectation of a more modest $1.10 loss, a 7.8% overall depreciation. Same store sales dropped 1.5%, with Kmart dipping 2.1%.

But even this unambiguous evidence of a relentlessly steep slide is not the grisliest of the news. Previously, Sears’ appliance division managed to thrive even amidst the company’s persistent doldrums and a wheezing economy. Sears is the biggest appliance seller in the US and the maker of historically popular Kenmore products. In each of the past four years, they have seen brisk growth in appliances topping $23.7 billion in sales last year.

However, the appliance division is now beset by the same underperformance that has plagued the company as a whole. This is especially dispiriting news for Sears because its primary competitors in the sector all reported impressive growth. Despite tepid store traffic and consumer reluctance to purchase bigger ticket items during a period of economic uncertainty, Lowe’s, Home Depot, Best Buy and Hhgregg all experienced impressive appliance sales.

Craig Johnson, analyst at Customer Growth Partners, said, “They should be thriving now with the upturn in the housing market. They are still number one, but barely.”

And given the fact that appliance sales have always been a core component of Sears’ overall success, Johnson interprets the company’s floundering as a harbinger of irreversible decline. “It’s a place where your father and grandfather used to shop. “It’s not just appliance. [Sears] is heading downhill, and nobody is stepping on the brakes.”

Sears’ CEO Eddie Lampert, also apparently the retailer’s chief optimist, focused on the half of the glass he still sees as full. “We made meaningful progress this quarter in our transformation to a member-centric company. At the same time, we recognize how important it is to improve the profitability of our company and I am disappointed that we did not deliver a better result.”

Credit Suisse’s Gary Balter countered Lampert’s confidence with a bleak diagnosis: “Sears remains on a dangerous downward spiral.”