Financial Performance

Cost-Cutting Narrows Sears’ Loss to $251M

The retailer's Q2 results were "a little bit heartening, but still left some open areas of worry," including another double-digit comp sales decline.
Matthew HellerAugust 25, 2017

Sears Holdings on Thursday reported a smaller-than-expected quarterly loss, reflecting its cost-cutting efforts, but another double-digit decline in same-store sales underscored the challenges facing its turnaround program.

For the second quarter, the retailer posted a net loss of $251 million, or $2.34 a share, down from a loss of $395 million, or $3.74 a share. S&P had projected a loss of $266 million.

Revenue dropped 23% to $4.37 billion, beating estimates of $4.21 billion, but sales at Sears and Kmart stores open at least a year tumbled 11.5% — only a slight improvement on the previous quarter’s 11.9% drop. S&P Global Market Intelligence analysts had estimated comp sales would decline 7.1%.

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Store closures contributed to approximately $770 million of the overall sales decline. On Thursday, Sears announced it would close another 28 Kmart locations as part of its cost-cutting campaign.

The second-quarter results were “a little bit heartening, but still left some open areas of worry,’’ Greg Portell, lead partner in the retail practice of consulting firm A.T. Kearney, told USA Today. “The fact that they were able to deliver better-than-expected earnings while their same store sales declined dramatically was in my mind an indication that their cost [cutting] program seems to be on track.”

But he added, “how long they can sustain double-digit same store losses while still keeping cost cuts ahead of the trend will be an ongoing area of attention.”

According to USA Today, Sears is betting on its Shop Your Way customer loyalty program to help lead a turnaround and has also won investors’ favor with a deal announced in July to sell its Kenmore appliance brand on Amazon.

In trading Thursday, Sears shares closed at $8.55, down 0.23%, after rising as much as 10.6% earlier in the session.

“We are making progress on the strategic priorities we outlined earlier this year and remained focus on returning our company to profitability,” CEO Edward Lampert said in a news release. “The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance.”