Check out the cost cutting formula failing at Sears.

In the past few weeks a slew of retailers, ranging from Target to Macy’s to Dillard’s, have posted results that were better than Wall Street expected, helped by cost cuts.  Retailers have done everything from freezing executive salaries to eliminating jobs to slowing store expansion plans.

But on Thursday, Sears reported a surprise loss in its second quarter while analysts were expecting a profit.

The company, controlled by hedge fund manager Edward Lampert, cut total costs and expenses 8 percent. But revenue fell 10.3 percent to $10.55 billion.

Sales at its Sears stores continued to suffer from the faltering housing market, which has sapped demand for its Craftsman tools and Kenmore appliances.

Same-store sales at Sears fell 12.5 percent, while Kmart’s same-store sales slid 3.9 percent. Overall, same-store sales fell 8.6 percent, and the decline accelerated after slowing during the past two quarters.

“Ouch,” wrote Morgan Stanley analyst Gregory Melich in his note reviewing the results. “This morning’s 2Q miss was pretty much across the board, with weak comps and lack of gross margin expansion standing out.”

Bottom line, he said, Sears remains a weak retail asset.

Or, as Credit Suisse analyst Gary Balter put it in his note entitled “Put a Fork In It” — “We continue to view Sears Holding as the most overvalued stock in our coverage.”

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Check out the ten largest U.S. retailers.

The National Retail Federation’s STORES magazine is out with its annual ranking of the top 100 retailers.

The list shows that U.S. consumers have been focused on bargains and basic necessities, such as food and medicine.  Wal-Mart tops the lineup, followed by Kroger and Costco.  Home Depot fell from No. 2 in 2007 to the fourth spot in 2008 as many shoppers decided to cut back on costly home-improvement projects.

Home Depot, Lowe’s and Sears Holdings were the only members of the top 10 to see their revenue fall in 2008.

Some other rankings that may interest you: Amazon.com is the 19th largest retailer, ranking higher than well-known chains such as J.C. Penney, 7-Eleven and Gap.  Apple’s stores and iTunes combined hold the 40th spot, topping chains such as Nordstrom, Whole Foods and Barnes & Noble.

The companies were listed by annual revenue, which may include estimates for private or closely-held companies.  Revenue from major non-retail operations were excluded when possible.

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(Reuters photo)

Check out Americans buying fewer books and searching for cheap chic.

Barnes & Noble said quarterly sales at its stores fell 4.8 percent and comparable sales on its web site fell 10.4 percent in the latest quarter.  Over at Ross Stores, sales rose 5 percent, as consumers scooped up bargain fashions.

Barnes & Noble CEO Steve Riggio called 2008 “the most challenging year that the company and the industry have ever experienced” and added the company would continue to hold down expenses to cope.

Sales at the company’s namesake stores open at least a year fell 7.3 percent and things don’t seem to be picking up soon.  Barnes & Noble expects those sales to fall 6 percent to 9 percent this quarter.

On the other hand, here’s what Ross CEO Michael Balmuth had to say:  “We are very pleased with our solid earnings per share growth for both the fourth quarter and fiscal 2008.  Our results are especially noteworthy considering the extremely challenging macro-economic and retail environment that became increasingly difficult as the year progressed.”

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(Reuters photo)

Barnes & Nobles expects to open 20 to 25 new stores in 2009 — down from 30 to 35 store openings this year.
 
It’s not that the company wants to open fewer stores, according to  Barnes & Noble Chief Executive Joseph Lombardi.

While the bookseller is taking advantage of favorable deals with existing landlords, it said the U.S. housing crisis and credit crunch mean that developers are not able to finance as many new projects  — leading to fewer opportunities for Barnes & Noble to open stores in new shopping centers. 

“It is true that landlords are offering better deals for many existing centers. As you can imagine, we’re a very, very desirable tenant, and we continue to be very selective about going into existing centers or renovated centers,” Lombardi said on a call with analysts. ”

“But in terms of new development, the principal reason for the pull-back is that many developments are being canceled. So the developers are not able to finance many new projects, and that’s the principal result. So we can’t go somewhere where there’s no center … most of those decisions are not ones that we pulled out of, but where the developer pulled the plug.”

Barnes & Noble cut its full-year forecast on Thursday, blaming a troubled U.S. economy, sending shares of the largest U.S. specialty bookseller down more than 4 percent.

(Photo: Reuters)
 

Check out why Heinz didn’t suffer like Hormel did in the past quarter.

H.J. Heinz came in with a quarterly profit that beat Wall Street expectations, helped by price increases and new product sales, while Jennie-O turkey seller Hormel Foods saw its earnings dip.

Food companies have found it tough going as commodity costs shoot up, but Hormel was particularly hard hit. The reason? It raises the turkeys that it eventually sells — meaning spiking corn feed costs hurt its results. 

Also in food news –  Burger King reported quarterly numbers that easily beat analysts’ expectations, as consumers headed to its restaurants for a burger or two. It also issued a fiscal 2009 outlook within Wall Street’s expectations.

On the apparel end, Children’s Place posted a small quarterly profit, helped by summer clothing sales and cost cuts. Still, the kids’ apparel retailer said it expects further pressure on consumer spending due to the weak U.S. economy.

To round up news in the sector, Kohl’s Corp, a mid-tier department store operator, named its president Kevin Mansell as its chief executive, replacing Larry Montgomery, who will remain the company’s chairman.

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(Photo: Reuters)

Check out those coupons from Borders.
 
In a new report, J.P. Morgan analyst Charles Grom begins tracking the promotional cadence at book sellers. Grom said he is keeping a close eye on discounts and promotions as the price war among book retailers extends into the first half of 2008 and Borders prepares to launch its own e-commerce site.
 
 
The view so far?  “Borders is still clearly focused on driving the top line, perhaps at the expense of margins, as it remains the most promotional retailer in bookselling today,” Grom wrote.
 
Borders averages about two coupons per week, with spikes in broad-based discounts during the holiday, quarter-end and month-end periods, Grom said. The company put more promotional focus on specific categories in February and March.
 
Barnes & Noble’s rewards program, unlike Borders’, is subscription based, with members paying $25 and receiving discounts,
 
“As such, Barnes & Noble’s direct marketing campaign serves more as a reminder of discounts rather than a limited time offer,” Grom said. But he added that he’s seen some special offers from Barnes over the past several weeks, including a 40-percent discount on kids’ books.
 
Grom sees the pace of discounts at Borders continuing in the first half as it ramps up e-commerce sales and faces macroeconomic headwinds.
 
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 (Photo: Reuters)