Sears (NYSE:S) isn't out of the woods yet. In the first quarter since it sold its credit card operations, it has reported a hefty quarterly loss. Apparel continues to be its albatross, and an albatross isn't exactly what you'd call an accessory.

Sears shed its credit card operation by selling it to Citigroup (NYSE:C) recently, a move that gave quite a boost to last quarter's results. However, at that time Sears did pare its forward guidance, bringing us to today. Sears reported a loss of $859 million, or $3.90 per share, compared to net income of $192 million, or $0.60 per share, in the same quarter last year. If you take out the effects of an accounting charge, Sears lost $20 million, or $0.09 per share.

Although the sale of the credit card operation has allowed Sears to continue to hack its debt to $3.5 billion (down from $5.3 billion in January), there are still signs that the core business isn't yet up to speed. Today's results included a 14% drop in sales, to $7.8 million. While many of its home lines are doing well, there's still trouble with apparel.

Sears' valiant efforts in that department have been noted. The company has tried to revamp shoppers' perceptions through acquisitions of brands like Lands' End and Structure. However, despite the obvious pent-up demand for clothes so far this year -- bringing good times to many retailers -- it's a boat Sears appears to have missed.

The retailer admitted it failed to get winter merchandise off the floor, and ordered smaller amounts of spring apparel than met demand. So, it appears demand -- a question of late, at Sears -- might have been there, had the company ordered the appropriate amount of merchandise.

Meanwhile, past observations on Sears have garnered a lot of reader feedback about customer-service disappointments in its stores. You can upscale your brands, but if service stinks, watch once-loyal customers turn disloyal. There are lots of other options, including Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and J.C. Penney (NYSE:JCP).

Despite the shaky start, Sears sees a better 2004 ahead. But lackluster sales don't bode well for Sears. It seems there's still work to be done in mastering the art of selling apparel.

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Alyce Lomax does not own shares of any of the companies mentioned.