Strategy

Store Sales Data Spark Sears Stock Slide

Sales at U.S. stores open at least a year fell 10.6% in the second quarter to date as Sears tries to execute its turnaround strategy.
Matthew HellerAugust 3, 2015
Store Sales Data Spark Sears Stock Slide

Shares in Sears Holdings Corp. fell 10% in trading Monday after the struggling retailer announced a sharp decline in comparable store sales for the second quarter to date.

Sears’ financials for the second quarter ended Aug. 2 are not due to be reported until Aug. 20 but, in a news release, it said sales at U.S. stores open at least a year declined 10.6% in the quarter-to-date period ended July 25, reflecting a 13.9% drop at Sears stores and a 6.9% fall at Kmart stores.

Comparable store sales, a key metric for retailers, have now fallen for more than 20 quarters as Sears tries to execute a turnaround strategy that includes shrinking operations, closing stores and exiting under-performing categories.

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“Either the brilliant turnaround plan for Sears isn’t working as well as anticipated, or it’s just taking a lot longer than shareholders would expect,” Consumerist commented.

Excluding the impact of the consumer electronics business, a business Sears said it was “altering to meet the changing needs of our members,” total comparable store sales would have declined 9.1%, consisting of decreases of 5.4% and 12.5% at Kmart and Sears, respectively.

Reuters reported that comparable store sales at Sears are expected to continue to slide at nearly the same levels for the remainder of the year.

“[Sears] is flush with cash, but we expect that balance to be used to fund $1 billion plus of operating losses annually,” Evercore ISI analyst Greg Melich wrote in a note. “[Sears’] ‘shrink to win’ strategy is unlikely to result in positive cash flow and, in our view, a liquidity event is a matter of when not if.”

In its news release Monday, Sears said it expected total cash and revolver availability of approximately $3.0 billion at the end of the second quarter, consisting of approximately $1.8 billion in cash plus $1.2 billion under its domestic credit facility. The company has realized about $3 billion from the sale and lease back of 235 Sears and Kmart stores to a real estate investment trust it set up recently.