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Q3 Rough On Sears But Not As Brutal As Last Year

Friday November 16th, 2012 - 2:28PM


Sears Holdings Corp. today reported a third quarter net loss from continuing operations attributable to shareholders of $498 million, or $4.70 per diluted share, versus a net loss of $410 million, or $3.85 per diluted share, in the 2011 period. Adjusted loss per diluted share was $1.99 versus $2.55 in the 2011 period, the company announced.

Financial analysts surveyed by Thomson Reuters, on average, expected the company to report a loss of $2.18 per share.

Adjusted EBITDA came in at a loss of $156 million in the 2012 period versus a third quarter 2011 loss of $190 million. Operating loss was $428 million in the 2012 third quarter and $447 million for the year-prior period.

Sears Domestic's comparable store sales slipped by 1.6% in the third quarter of 2012 while Kmart's comps declined 4.8%. At Sears Canada, comps slid 5.7%.

Lou D'Ambrosio, Sears Holdings president and CEO, said in commenting on financial results, "For the third quarter and year-to-date, we improved EBITDA, accelerated our strategic actions and generated significant cash by delivering on the actions we outlined at our annual meeting. Our EBITDA improvement in the quarter came from some of our most important categories like Appliances, Apparel and Home Services as we introduced new offers, honed pricing, effectively managed costs and implemented better inventory management. We did experience shortfalls, however, in categories like Grocery and Household and Consumer Electronics, and are taking actions to improve that performance. We will continue to take the actions necessary to create value and retain the flexibility to invest in the strategic priorities of our company. We are rapidly moving to a member-based business model. Our investments are focused on our members and their experience— at the store, online, and mobile— which is why we are investing in Integrated Retail and our Shop Your Way membership program. Over half of our revenues at Sears Domestic and Kmart now come from Shop Your Way membership.”

Standard & Poors analyst Jason Asada sees mixed prospects for Sears Holdings. In a research note, he said some initiatives at Sears stores have been helping the chain improve results but that competition had been rough on Kmart. In the research note he stated that comps fell less at Sears U.S. stores than he expected and more at Kmart than he anticipated. Weak consumer electronics sales hurt comps, yet “comp gains in apparel and home appliances at Sears Domestic imply to us that merchandising and marketing investments are paying off. We see aggressive competition continuing to weigh on Kmart.”