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Sears stems losses but sales slump continues

Shares of Sears Holdings fell roughly 4% in afternoon trading Monday after the retailer released a first quarter report that showed narrowing losses amid falling sales. Sears, which also owns the Kmart chain, reported a loss of $303 million for the period ended May 2, compared to $402 million a year ago. The gross margin rose to 25.8% from 23.2% a year ago. Sales fell 25% to $5.88 billion. Same-store sales at Kmart and Sears fell 7% and 14.5%, respectively.

AP SEARS BUILDINGS F A USA MAThe report comes as Sears prepares to launch a real-estate investment trust this week in an effort to raise cash. The trust, Seritage Growth Properties, is an attempt by the long-suffering company to raise $2.6 billion in proceeds by selling and leasing back roughly 235 properties, mostly Sears and Kmart stores. Sears expects the trust will be declared effective by the Securities & Exchange Commission this week.

“We anticipate that the REIT will continue and accelerate many of the activities that we have been pursuing over the past several years,” Sears Holdings CEO Edward Lampert wrote in a letter to shareholders. “Specifically, we have been working to partner with other retailers and mall owners to enable us to reduce the operating footprint of our stores to smaller but still significant spaces, while leasing part of the store to retailers who will bring increased foot traffic and relevance to our locations.”

Kmart saw a drop in sales of consumer electronics, grocery and household goods, apparel and drugstore items. Sears saw declines in sales of clothing, home appliances, lawn and garden, consumer electronics and at Sears Auto Centers. Sears attributed much of the decline in sales to its efforts to streamline operations in 2014, including the decisions to shutter more than 200 Sears and Kmart stores. It also spun-off catalog and online apparel retailer Lands’ End and deconsolidate Sears Canada. The company also cut total costs and expenses by almost 27% to around $6.1 billion, offsetting some of its losses.