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Say What?

Analysts who were already critical of Sears Holdings Corp.'s management style in the run-up to Sears' release of fourth-quarter earnings, were even more confused after the lackluster results were announced. The company boasted of its positive net income — $648 million for the quarter — but that came as sales at its stores continue to languish.

As Sears tried to put a positive spin on the seemingly uncertain-at-best results, analysts wanted to see a more clear-cut accounting of short- and long-term strategies. Chairman Edward Lampert made it clear that he took pride in the net income figures, which more than doubled. But that came in large part due to cost cutbacks stemming from combining the Sears and Kmart chains and income generated from selling off leases and closed stores. The quarterly profit gain also masked the fact that Sears U.S. same-store-sales fell 12.1 percent.

“While reducing sales is not a prescription for success on a base of healthy profitable stores, it can be … where profit was not the primary objective,” Lampert said in a note to investors, pointing out that Sears and Kmart are focused on building long-time relationships with customers to sustain future profits.

At another point in the note, Lampert said out loud what many couldn't help but wonder was the result of too many money managers buying up too many retail businesses. Said Lampert: “I consider same-store sales to be … vastly overrated.”

Other retailing execs and Wall Street analysts would later say they didn't think same-store-sales results — which have been the standard measure of success for decades — should be dismissed so hastily.

The big question is that 18 months after the $11 billion acquisition of Sears by Kmart was announced, Sears/Kmart joint strategy is still hazy. How are the businesses going to be combined to make use of the best parts of each chain?

The numbers for the quarter ended Jan. 28 come on the heels of questions surrounding the ongoing relationship with Martha Stewart and Sears Holding. Rumors suggested Lampert was trying to get Martha to take less money to be sold in more stores. Neither Martha Stewart nor Sears would comment on the reports, which also had Martha negotiating to switchover from Kmart to Macy's. Meanwhile, Sears already abandoned its Sears Essentials concept, which was supposed to combine the best brands of both stores. The stores are now being called Sears Grand, taking the name of an off-mall concept that originated before the Sears/Kmart merger.

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