Turnarounds

Sears Loses $395M in Another Grim Quarter

The retailer's same-store sales dipped 5.2% and it is getting another $300 million in financing from CEO Edward Lampert's hedge fund.
Matthew HellerAugust 25, 2016

Sears Holdings posted another large loss and a 5.2% decline in same-store sales during a grim second quarter that cast more doubt on its efforts to return to profitability.

The retailer reported Thursday that it lost $395 million, or $3.70 a share, for the period ended July 30, compared to profit of $208 million in the year-ago quarter. Kmart same-store sales declined 3.3%, and Sears domestic same-store sales fell 7%.

At a $2.03 loss per share, adjusted earnings beat analyst estimates for a loss of $3.48, and the total same-store sales decline of 5.2% improved on the first-quarter drop of 5.9%.

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But the results did little to soothe investors, driving Sears shares down 4.3%, to $14.07, in trading Thursday. The stock has now lost more than 30% so far this year.

“We continue to face a challenging competitive environment,” Sears Chief Executive Edward S. Lampert said in a news release.

CFO Rob Schriesheim noted that through property sales and the termination of certain loans, Sears was able to generate $1.4 billion in financing in the first half of this year. But the company also announced Thursday that it had accepted a $300 million loan from Lampert’s hedge fund, ESL Investments.

Sears’ cash and equivalents have declined to $276 million from $1.8 billion a year ago. “Perhaps more concerning than the sales declines are the dangerously low cash levels for Sears as it gears up for the holidays,” TheStreet commented.

The company has recorded annual losses in each of its past six fiscal years as it struggles to compete with other mass marketers and online shopping. As part of Lampert’s turnaround strategy, it has been selling assets and speeding up store closings.

The store closures reflect Sears’ plan to focus on driving customer loyalty through a membership program called Shop Your Way. But according to USA Today, some analysts “remain skeptical that Sears is doing enough to be relevant to shoppers.”

Sears’ stores are “dull, uninspiring and somewhat depressing,” Neil Saunders, CEO of retail research firm Conlumino, said in a note Thursday.