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The Globe and Mail

Sears to spin off some U.S. stores, sell others

In this Feb. 22, 2012 photo, shoppers enter a Sears department store location in Dedham, Mass.

Steven Senne/AP

Sears Holdings Corp. said Thursday that it will spin off its smaller Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400-million (U.S.) to $500-million as it seeks to regain profitability and market share.

The operator of Sears and Kmart also says will sell 11 stores to the real estate company General Growth Properties for $270-million.

The moves drove Sears' stock up more than 13 per cent in premarket trading.

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The disclosures of the store plans came as the Hoffman Estates, Ill.-based company reported it swung to a loss in the fourth-quarter while revenue fell 4 per cent to $12.48-billion. Adjusted earnings totalled 54 cents per share, below analyst expectations.

In a call with analysts, CEO Lou 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, 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.

Led by billionaire investor Edward Lampert, Sears has suffered losses as consumers turn elsewhere. It has sought to improve results by cutting jobs and costs and closing underperforming stores.

Investors have long speculated that Mr. Lampert's long-range plan could be to unlock the value of the company's massive real estate holdings.

Net loss for the three months ended Jan. 28 amounted to $2.4-billion, or $22.47 per share. That compares with net income of $374-million, or $3.43 per share, a year ago.

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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 per cent to $12.48-billion from $13-billion last year. Analysts expected $12.44-billion.

For the year, net loss totalled $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 per cent to $41.57-billion from 442.66-billion a year ago.

Its shares rose $6.92, or 13.3 per cent, to $59 in premarket trading.

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