(Adds details on lending facility, sales drop)
June 8 (Reuters) - Sears Holdings Corp reported a smaller first-quarter loss as it cut advertising and other costs, but sales continued to tumble, underscoring the need for a big cash injection that the struggling retailer said would materialize next month.
The company expects its plan to spin off 235 Sears and Kmart stores into a real estate investment trust to be approved by the Securities and Exchange Commission this week, paving the way for a rights offering to sell shares in the REIT to existing shareholders on Friday.
The retailer, which has lost $7 billion over the past four years, expects to receive about $2.6 billion in proceeds from the sale early in July.
That deal, if accomplished, should buy Sears time to pursue a revival strategy that involves a loyalty program and shrinking its presence to its best-performing stores.
Still, that strategy has yet to produce profitable results for the retailer, which reported its 12th straight quarterly loss.
For the quarter ended May 2, net loss attributable to shareholders was $303 million, or $2.85 per share, following a loss of $402 million, or $3.79 per share, a year earlier.
Overall revenue slumped 25 percent to $5.88 billion, reflecting the sale of most of its stake in its Canadian operations, the spinoff of the Lands' End clothing chain and the closure of stores.
Still, shares of Sears jumped 4 percent in premarket trading.
It reported a sharp drop of 10.9 percent at comparable stores open at least year, a key measure of retail performance. Sales at Kmart fell 7 percent, while Sears' sales slid 14.5 percent, hit by falls in key categories like appliances, apparel and auto centers.
Sears said some of the decline was expected as it shrinks operations. Apparel was also hurt by supply disruptions due to a slowdown at ports in the West Coast, the company said.
Sears said it was in talks with lenders to extend a revolving credit facility, due to expire in April 2016, to 2020. It has already reached agreement with three lenders representing $1.175 billion in commitments, it said. The size of the facility would likely decrease to about $2 billion from $3.275 billion.
Sears was seeking a smaller lending framework because it has fewer stores, a larger online presence, and less need for financing due to decreased inventory levels, Chief Financial Officer Rob Schriesheim said on a pre-recorded conference call. (Reporting by Nathan Layne in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Don Sebastian and Bernadette Baum)