Tags: sears | earnings | loss | retailer

Sears First-Quarter Loss Narrows as Retailer Sells Assets

Monday, 08 Jun 2015 09:16 AM

Sears Holdings Corp., the retailer run by hedge fund manager Edward Lampert, posted a narrower first-quarter loss, helped by asset sales and improving margins.

The loss shrank to $303 million, or $2.85 a share, from $402 million, or $3.79, a year earlier, the Hoffman Estates, Illinois-based company said Monday in a statement.

Lampert, Sears’s chief executive officer and largest shareholder, has been lopping off assets such as the Lands’ End clothing business, aiming to stem the flow of red ink. He’s also working on forming a real estate investment trust named Seritage Growth Properties, which will buy store locations and lease them back to the retailer. On Monday, the retailer said it expects that transaction to raise $2.6 billion.

“The operating results for Sears are a heck of a lot less important than the liquidity that spinning Seritage out is going to provide them,” said Matt McGinley, an analyst at Evercore ISI in New York.

The REIT deal, which lets the company generate cash from its sprawling property holdings, has helped fuel a rally in the shares. Sears’s stock rose 24 percent this year through the end of last week, following an 11 percent decline in 2014.

The company’s retail operations remain mired in a slump. Comparable-store sales, considered a key gauge of retail performance, plunged 7 percent at Kmart and 14.5 percent at Sears last quarter. The companywide decline totaled 10.9 percent in the period, which ended May 2.

Profit Margins

The company, which has posted 12 straight quarters of losses, did see some operating improvement, though. Gross margin — the amount of profit left after subtracting the cost of goods sold — widened at both Sears and Kmart. There were fewer markdowns in categories such as clothing and appliances, bolstering results.

Sears also said it expects to reach an agreement in the current quarter to extend and refinance its $3.3 billion revolving credit line, which expires next year, to 2020.

The REIT transaction and other deals will further Lampert’s vision of an “asset-light retailer,” he said in Monday’s statement. The company is focusing on its Shop Your Way rewards program customers, who account for about three-quarters of sales. The chain will have fewer, smaller locations and offer more multichannel options, such as services that let customers reserve items online and then pick them up in stores.

More Productive

“We will become more productive with our physical store space,” Lampert said.

Lampert has previously acknowledged that a lack of funds has hampered his plans since he merged Sears and Kmart in 2005.

“One of my regrets in helping steer Sears and Kmart over the last decade is that we haven’t had or generated the money to fund our transformation quickly enough,” he said in a blog post last month.

McGinley said he’s skeptical the once-mighty retail chain can regain its former glory.

“Sears as a concept doesn’t resonate with the consumer in the way it did 20 or 30 years ago,” he said. “Sears just doesn’t have a real reason to be anymore.”


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Sears Holdings Corp., the retailer run by hedge fund manager Edward Lampert, posted a narrower first-quarter loss, helped by asset sales and improving margins.
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2015-16-08
Monday, 08 Jun 2015 09:16 AM
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