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RAPAPORT... Sears Holdings reported that sales declined 13.6 percent year on year to $10.6 billion for the fourth quarter that ended on February 1 and included the Christmas period. Gross margin dropped to 23.4 percent from 25.8 percent one year earlier. The retail giant reported a loss, attributable to shareholders, of $358 million or $3.37 per share, which was an improvement from the loss of $489 million or $4.61 per share posted one year ago. Fiscal year revenue slid 9.2 percent to $36.2 billion, gross margin fell to 25.9 percent from 26.7 percent and the retailer's net loss attributable to shareholders rose to $1.37 billion or $12.87 per share from $8.78 per share in 2013. U.S. comparable-store sales fell 6.4 percent in the fourth quarter, led by a 7.8 percent drop for Sears stores. For the fiscal year, U.S. same-store sales fell 3.8 percent, again led by Sears department stores, which fell 4.1 percent. In a note to shareholders, Sears chairman and CEO, Edward S. Lampert, stated that the financial year marked a transformation from a traditional, store-based retailer to a membership company that serves shoppers across an integrated platform. Lampert said that Sears Holdings should begin to demonstrate the financial advantages of this transformation more effectively in 2014 and that he believes the entire U.S. retail industry will land where Sears is now. 
Christmas season 2013 was ''tough to terrible'' for Sears and many others, Lampert wrote, proving just how irrevocably retail has changed. ''And, 2013 highlights just how important all of our work is to transform Sears and Kmart from traditional brick-and-mortar stores that simply sell products into an integrated platform. We build relationships with our members, anticipate their needs and serve them in the manner most convenient for them – whether in store, at home or on the go. This change is resulting in improved member engagement, which is not only a key component of our member strategy, but, in my view, may prove to be most important in the year ahead,'' he said. To that end, Sears ''Shop Your Way'' program is helping its members live better through five pillars, according to Lampert. Sears is creating lasting relationships with members by empowering them to manage their lives; attaining best-in-class productivity and efficiency; building its brands; reinventing the retailer with technology and innovation and reinforcing Shop Your Way by living by these values every day. Sales from Shop Your Way members accounted for 72 percent of full-line Sears stores in the fourth quarter, up from 58 percent one year ago. ''Others in our industry are struggling to figure out how to adjust their business models to deal with the combination of changing consumer behavior and intense business model competition,'' Lampert said. ''We believe that these Shop Your Way results show that even with the challenging results across the industry and in our stores, our integrated retail strategies give us the opportunity to address this changed consumer behavior and to evolve our business model.'' He took a shot at critics who have been urging Sears to spend millions of dollars on store décor and new fixtures by claiming that capital investment on Shop Your Way focused on consumer change and is now paying off. ''We believe that the developments in the entire retail industry validate our decisions to shift much of our investment instead to digital and integrated retail,'' he said. In the year ahead, Sears may spin off Lands' End and it is evaluating alternatives for Sears Auto Centers, among other efforts, which Lampert said would raise in excess of $1 billion this year to further fund its ongoing transformation. Sears generated $2 billion of liquidity in 2013 from real estate sales and by reducing inventory and fixed expenses. Following widespread last minute shipping problems for Christmas delivery that many retailers experienced in 2013, Sears has taken a new approach on shopping choices based upon its members' feedback, according to Lampert. ''In-vehicle pickup allows members to notify us when they have arrived at our stores through the Shop Your Way app and then have their purchases delivered directly to their cars. We anticipate that experiences like this will become even more popular. Importantly, it's an option we provide our members because it's something they've told us they want. ''We made a choice several years ago to focus Sears Holdings on becoming a member-centric company built on the five strategic pillars noted above. Our strategy has evolved further as the retail industry has changed and our ability to compete — with fewer stores, with less space per store and with a marketplace of products — has become more clear. It is up to us to execute on this strategy and to restore profitability to the company,'' he concluded.
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