Dive Brief:

• Sears Holdings Corp., which runs Sears and Kmart stores, Thursday said that Q4 revenue fell $796 million to $7.3 billion, compared to Q4 revenue of $8.1 billion year-over-year. 

• Fourth quarter same-store sales at Kmart fell 7.2% and 6.9% at U.S. Sears stores, an improvement from the first three quarters of 2015, according to the report. Warm weather and aggressive discounting over the holidays from rivals hurt the retailer, with electronics a particular weak, though improved, spot, the company said.

• For the full year 2015, revenue decreased approximately $6.1 billion to $25.1 billion, compared to revenue last year of $31.2 billion. A majority of the decline was related to store closings and a “focus on our transformation into a member-centric retailer” through its Shop Your Way program, the retailer said.

• Sears cut Q4 expenses by some $150 million and said it will further cut costs by $550 million to $650 million this year.

Dive Insight:

Sears continues to fight its way out of its severe doldrums, but its cost-cutting focus is likely hampering that effort. Earlier this month, the company said it would move to aggressively cut costs by closing Sears and Kmart stores and selling more assets. The retailer said some 50 unprofitable stores will likely close in coming months. 

Sears has acknowledged the weakness in its apparel sales after a January report by Prosper Analytics & Insights that found it’s losing market share in that space to used-clothing retailer Goodwill, and said it is moving to improve that. 

“[I]n 2016 and future periods, we intend to improve the performance of our apparel business through changes to our sourcing, product assortment, space allocation, pricing and inventory management practices,” the company said in a statement.

While closing underperforming stores is often a necessary and even bold move that dings sales in the short term but lifts profitability in the long term, the retailer may be toying with a downward spiral that could impede its efforts to improve the conditions of its stores and boost its faltering apparel sales.

This comes at a tough time for department stores, particularly mid-tier department stores like Sears. As malls continue to lose traffic, Sears and other anchors are seeing increased competition from smaller boutiques, fast-fashion retailers like H&M, and even big box stores like Target. Sears' concentration on becoming a "member-centric" retailer may help it boost loyalty among its existing customers - members of Sears' Shop Your Way program drove 73% of eligible sales in 2014 Q2. But with rival department stores like Kohl's also ramping up their loyalty programs, the question is if there are any new customers for Sears to attract.