Sears’ property sales propped up its second-quarter earnings amid slumping store revenue.
The Hoffman Estates, Ill.-based company on Thursday posted net profit of $208 million, or $1.84 a share, versus a loss of $573 million, or $5.39, a year earlier. Excluding the $508 million gain from the sale of stores to Seritage Growth Properties, the real estate investment trust that Sears spun off in July, Sears lost $256 million.
Sears has beefed up its rewards program and added features such as the ability to reserve items online for pickup in stores, but it did not help stores sales in the second quarter — Kmart and Sears Domestic comparable store sales declined 7.3% and 14%, respectively.
However, the company said that this was driven in part by “highly targeted promotional and marketing spend to better align with member needs, and a shift away from low-margin categories, such as consumer electronics.”
“During the quarter we completed many of the objectives we laid out to transform Sears Holdings from a traditional, store-network-based retail business model to a more asset-light, member-centric integrated retailer,” Sears’ chairman and chief executive Edward S. Lampert said in a press release.
However, the probability of a turnaround for either of Sears’ retail chains is “very dim,” Evercore analyst Matt McGinley told Bloomberg. Even with a modest improvement in profitability in the quarter, “they’re still burning a tremendous amount of cash, and it’s actually gotten worse year over year.”
Lampert is betting that the company’s repositioning into a more nimble retailer relying on more ecommerce will pay off, according to Bloomberg.
“The company is still trying to outrun the proverbial melting ice cube, which will mean more asset sales down the road to fund losses until it can find the right store base to support its asset-light goals,” Bloomberg Intelligence analyst Noel Hebert said.
As of August 1, 2015, Sears said, it had $1.8 billion in cash, no revolver borrowings, and $657 million of letters of credit outstanding.