Coverage: Sears/Kmart continue to struggle
The parent company of retailers Sears and Kmart reported a loss on Thursday and that its same-store sales — a key barometer of a retailer’s health — continued to decline.
Hadley Malcolm of USA Today had the news:
The company went in the red for the period ended July 30, recording a loss of $395 million, or $3.70 a share, compared to profit of $208 million in the year-ago quarter, or $1.84 a share. Adjusted for certain items, the company had a $2.03 loss per share. That beat analyst estimates for a per share loss of $3.48, according to S&P GlobalMarket Intelligence.
Sales at Sears and Kmart locations open at least a year fell 5.2%, better than the 5.9% drop in the first quarter and the 10.8% drop in the second quarter last year. Total revenue fell to $5.7 billion from $6.2 billion in the same quarter last year; analysts expected sales of $5.4 billion.
The results reported Thursday didn’t impress investors, who sent the company’s stock down about 5.5% in afternoon trading.
A big part of the company’s transformation strategy includes selling its real estate assets to unlock cash. Chief Financial Officer Rob Schriesheim said in a statement that Sears was able to draw on $1.4 billion in financing in the first half of this year due to selling property and terminating certain loans.
Matthew Rocco of Fox Business focused on the company putting its Kenmore and Craftsman brands up for sale:
In May, Sears announced plans to seek out buyers or partners for its Kenmore, Craftsman and DieHard brands, hoping to unlock the value of three brands that are well-known in their respective categories. The company provided an update on Thursday, saying it continues to explore strategic alternatives for the brands—housed under a division known as KCD—and Sears Home Services. Sears is considering “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.
So far, Sears has heard from domestic and international retailers, original equipment manufacturers, investors and other firms. Sears expects to continue its assessment over the next few months.
Sears already has a partnership with Ace Hardware, which sells Craftsman tools within its stores. Kenmore appliances and DieHard auto parts are exclusive to Sears, Kmart and Sears Auto Centers. Kenmore recently expanded beyond its traditional appliances into high-definition televisions.
Phil Wahba of Fortune noted that the company had to borrow $300 million from CEO Eddie Lampert:
The hedge fund manager will provide additional debt financing of $300 million to the beleaguered retail company he now heads and created in 2005 by combining Sears department stores and Kmart.
News of the latest helping hand from Lampert, who controls just under half of Sears’ shares, comes amid yet another awful quarter: Comparable sales in the second quarter fell 3.3% at Kmart and 7% at Sears. The company blamed the poor showing on “a challenging competitive environment,” which is difficult to accept given how much better rivals Walmart and J.C. Penney fared. Revenue at Sears Holdings dropped 8.8% to $5.66 billion in the quarter ended July 30.
The new $300 million financing is only the latest support Lampert has provided his troubled retail empire. Lampert’s hedge fund, ESL Investments, had provided half of the initial $250 million tranche of a recent $500 million loan to fund the transformation Sears claims will make it a modern retailer. The latest round also allows Sears to take an additional $200 million of debt from other investors.