(Reuters) - Sears Holdings Corp reported its first quarterly profit in nearly two years, as the retailer slashed costs by nearly a third and benefited from the sale of its Craftsman brand, sending its shares surging as much as 32.5 percent.
The company’s stock, which is heavily shorted, posted its biggest intraday percentage gain in more than three months as the results provided some relief a couple of months after Sears flagged doubts about its ability to continue as a going concern.
Quarterly sales, however, continued their years-long decline, while the company’s cash balance fell to $264 million as of April 29 from $286 million at Jan. 28.
Sears, once the largest U.S. retailer, has been struggling for years to turn around its business amid intensifying competition from Wal-Mart Stores Inc and Amazon.com Inc.
The worsening retail environment hasn’t helped either, and Sears, like others including Macy’s Inc, has been closing stores and squeezing costs to cope.
Sears, which sold its Craftsman tools brand to Stanley Black & Decker Inc in March, said it had cut up to $700 million in costs to date since February as part of a program to reduce costs by $1.25 billion.
Total costs in the first quarter ended April 29 fell to $4 billion.
The company’s shares are down 18 percent since the retailer raised going concern doubts in March. Short interest in the stock amounted to 13.5 percent of outstanding shares, as of May 15.
Hedge fund investor and Sears CEO Eddie Lampert said on Thursday that the company needed to speed up efforts to improve performance but added that the quarter had “clearly demonstrated” its commitment to return to solid financial footing.
Lampert recently blasted the media for “unfairly singling out” the company over the past decade and blamed “irresponsible” coverage for the retailer’s woes.
Sears, which has not posted an annual profit in six years, has also struggled with a big debt pile.
Total liabilities at the end of the quarter was $12.6 billion, down from $13.19 billion at the end of the fourth quarter.
“The reported results pertain to the one-time gains has zero impact, in our view, on the credit story for Sears,” David Silverman, senior director, U.S. corporates at Fitch Ratings told Reuters.
Sales at Sears’ U.S. stores open more than a year fell 12.4 percent, while at Kmart they declined 11.2 percent. Total revenue fell by more than a fifth to $4.30 billion.
Net income attributable to Sears’ shareholders was $244 million, or $2.28 per share, within the range of the company’s forecast.
Excluding restructuring items, the company reported a net loss of $2.15 per share, compared with the $3.05 per share loss two Wall Street analysts expected, according to Thomson Reuters I/B/E/S.
Reporting by Sruthi Ramakrishnan in Bengaluru; Additional reporting by Gayathree Ganesan; Writing by Sayantani Ghosh; Editing by Arun Koyyur and Sriraj Kalluvila