Sears Same-Store Sales Plunge 11.5%; To Close Another 28 Stores
by Tyler Durden
Near insolvent retailer Sears Holdings reported another quarterly loss, with same store sales plunging in Q2 more than expected as the company offered more margin-crushing discounts amid an industry that is, in the words of Dick’s CEO, in “panic mode“. The company blamed a “retail environment that remained challenging, with continued softness in store traffic and elevated price competition.”
For Q2, Eddie Lampert’s company reported a net loss of $251 million, or $2.34 per share from $395 million or $3.70 per share, a year earlier. The adjusted loss was $1.16 a share, beating expectations loss of $2.48 per share, while revenue tumbled from $5.66 billion to $4.37 billion Y/Y primarily due to store closures, modestly beating expectations of $4.21 billion.
As part of its restructuring effort and attempt to return to profitability, Sears has been trimming its real estate portfolio, cutting costs and seeking additional liquidity. The retailer announced that it will be closing an additional 28 Kmart stores this year, in addition to the 180 Sears and Kmart stores that have already been shuttered this year, and the 150 stores that are slated to be closed by the end of the third quarter.
And while the company’s cost-cutting is a welcome, if long overdue, change a bigger problem for Kmart is the collapse in store traffic, as same-store sales plunged 11.5%, worse than the expected 7.1 percent decline.
Trying to put a favorable spin on another lousy quarter, CEO Eddie Lampert [pictured left] said that “we are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our Company to profitability… While the third quarter has historically been our most difficult quarter over the past several years, we are working towards making meaningful improvement in our performance this year as a result of the restructuring actions we have put in place.”
As noted above, Sears same-store sales fell 11.5%, including a decline of 9.4% for Kmart stores, and a drop of -13.2% at Sears stores. Spinning the worse than expected drop in traffic, Sears said that July was the best quarter for the company in terms of comparable sales, “as the restructuring program actions, including the closing of unprofitable stores, have begun to take effect.”
Sears said it continues to explore opportunities for its Sears Home Services and Sears Auto Centers, as well as its Kenmore and Diehard brands. This could include “potential partnerships or other transactions that could expand distribution of our brands and service offerings to realize significant growth,” the company said in a statement.
On the balance side, the struggling retail chain said it has been working to generate additional liquidity and ended the second quarter with $442 million cash on hand, compared with $286 million at the end of the first quarter. Sears has used up $605 million of its $1.5 billion revolving credit facility, leaving about $191 million in availability. Total debt at the end of the latest period was $3.5 billion, compared to $4.2 billion at the end of the first quarter of 2017, following recent asset sales.
Sears also said it has reached an agreement with Metropolitan Life to annuitize an additional $512 million of its pension liability, under which MLIC will pay future pension benefit payments to roughly 20,000 retirees, helping Sears further trim administrative overhead.
As discussed earlier in the year, Sears’ deteriorating financial conditions forced the retailer to disclose that there was “substantial doubt” about its ability to “continue as a going concern.” Met with fears by the Street that a bankruptcy was looming, Sears countered by saying it remained focused on trying to improve its business, saying the language was in adherence to regulatory standards,CNBC notes.
To ease bankruptcy fears, last month Sears said it would begin selling Kenmore-branded and Alexa-enabled appliances on Amazon, although that announcement had little effect on company shares, which have fallen more than 40% over the past 12 months.
Pictorial content added by TLB