Sears Holdings Corp (NASDAQ:SHLD) reported a wider loss in its third quarter as the ailing department store operator was hurt by weaker sales at its stores.

sears holdings logo

The results for the third quarter ended November 2, 2013 underscores the challenges Sears Holdings Corp (NASDAQ:SHLD) faces as it heads into the critical holiday shopping season which can contribute up to 40% of its annual revenue.

Sears posts net loss of $534 million

Net loss attributable to Holdings’ shareholders was $534 million or $5.03 loss per diluted share. This is against $498 million or $4.70 loss per diluted share reported in the prior year’s quarter.

The retailer’s revenues dropped $585 million to $8.3 billion for the third quarter as compared to revenues of $8.9 billion reported for the quarter ended October 27, 2012. The drop in revenue was primarily due to the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for roughly $200 million of the decline. Lower domestic comparable store sales also declined roughly $170 million.

Sears Holdings Corp (NASDAQ:SHLD)’s gross margin too decreased $322 million to $1.9 billion in 2013 due to the decline in sales as well as a decline in gross margin rate. Sears Canada’s gross margin for the third quarter of 2013 included a decrease of $13 million thanks to the impact of foreign currency exchange rates.

Less dependence on brick-and-mortar stores

The retailer is also in the midst of shifting its business, with less emphasis on its brick-and-mortar stores. Sears Holdings Corp (NASDAQ:SHLD) has roughly 2,500 stores in the U.S. and Canada.

Recently, Sears Canada agreed to sell five of its large urban locations back to its landlords in a deal worth $400 million, a move that could see layoffs of up to 965 store employees.

Sears Holdings Corp (NASDAQ:SHLD)’s  chairman and chief executive officer Edward Lampert said in a statement that the company is transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices.

The retailer is concentrating on its Shop Your Way Loyalty Program. Its sales to Shop Your Way members have gone up to 70% of its sales, up from 65% reported in the second quarter.

Last month, the struggling retailer announced its transformation plans to spin off its Lands’ End and Sears Auto Center operations with intention to focus on its core Sears and Kmart stores. Sears indicated that separating these two businesses from the rest of the company will encourage them to pursue their own opportunities, attract talent and optimize their capital structures.