(SHLD) Sears Holdings Lays Off – Focuses on Sales

Reuters reports that Sears Holdings Corporation (SHLD) has slashed 700 jobs in the appliances section of its Kmart discount stores. The company seeks to re-engineer the process of selling its appliances to combat flagging sales.

The company has now set up point of sale systems (POS) at its appliances section that require trained employees to handle sales. These employees have the skill to address queries from customers regarding appliances. The company is also introducing a toll free number to provide further assistance to its customers.

The lay-off affects employees in 225 stores. Only in February this year, Kmart had multiplied the number of appliance stores to 1,300 from 270 In total, Kmart employs about 100,000 employees.

The fourth largest broadline retailer in the U.S., Sears Holdings had disappointed the Street with its overall first-quarter 2011 results. The company reported an adjusted loss of $1.39 per share compared with the Zacks Consensus Estimate of a loss of $1.22.

The reported loss plunged drastically from the prior-year quarter earnings of 16 cents per share, primarily due to a sluggish top line. Management’s cost-cutting measures for boosting profits were largely criticized as improving the merchandise mix and customer service would have been a better option, according to analysts.

Furthermore, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively affect their discretionary spending and, in turn, the company’s growth and profitability.

Above all, Sears Holdings operates in a fiercely competitive industry, which includes retailing giants such as Wal-Mart Stores Inc. (WMT), Target Corporation (TGT), and Lowe’s Companies Inc. (LOW). Besides, the company faces competition from regional departmental stores, home improvement stores, consumer electronics dealers and specialty retailers. A sector characterized by cutthroat competition may dent the company’s future performance.

Sears Holdings currently has a Zacks #5 Rank, implying a short-term ‘Strong Sell’ rating. However, over the long term, we have a ‘Neutral’ recommendation on the stock.

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