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Sears Holdings Announces Q3 Sales and Revenue Declines

Thursday November 21st, 2013 - 3:46PM


Sears Holdings Corporation has announced financial results for its third quarter ended November 2, 2013. Net loss attributable to Holdings' shareholders was $534 million, or $5.03 loss per diluted share, compared to $498 million, or $4.70 loss per diluted share, in the prior year quarter. Adjusted EBITDA was $286 million for the third quarter of 2013, which was within the range of the company's previous guidance from October 29, compared to $172 million in the prior year quarter. 

"We are proactively transforming our business to a member-centric integrated retailer leveraging Shop Your Way to benefit from the changing retail landscape. We are transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices," said Edward Lampert, Sears Holdings' Chairman and CEO.

Highlights of our transformation to a member-centric integrated retailer, according to Sears Holdings include: 70% of sales are now made to SYW members, up from 65% last quarter; 17% year-to-date growth in its online and multi-channel sales over the prior year; and the company launched Adam Levine and Nicki Minaj in 500 Kmart stores and on shopyourway.com/kmart.com. According to Sears Holdings, the company is also on track to generate $2 billion of liquidity during fiscal year versus objective of $500 million.

Revenues decreased $585 million to $8.3 billion for the quarter ended November 2, 2013, as compared to revenues of $8.9 billion for the quarter ended October 27, 2012. The revenue decrease was primarily due to the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for approximately $200 million of the decline, as well as lower domestic comparable store sales, which accounted for approximately $170 million of the decline. Revenues were also impacted by approximately $110 million attributable to the separation of Sears Hometown and Outlet Stores, Inc., which occurred in the third quarter of 2012. 

For the quarter, domestic comparable store sales declined 3.1%, comprised of decreases of 2.1% at Kmart and 4% at Sears Domestic. The decline at Kmart reflects decreases in the company's transactional categories, such as grocery and household and drugstore, as well as declines in consumer electronics and toys, according to Sears Holdings. These decreases were partially offset by increases in the apparel and seasonal and outdoor living categories. The decline at Sears Domestic reflects decreases in most categories including the consumer electronics, lawn and garden, tools, home appliances and apparel categories, as well as declines at Sears Auto Centers, partially offset by an increase in the home category.

"During the third quarter, we continued with our strategy to redeploy our capital as we invest to accelerate our transformation. We announced several transactions that demonstrated our financial flexibility and we are on track to generate $2 billion of liquidity as compared to our previously stated objective of $500 million," said Rob Schriesheim, Holdings' CFO.

"On October 2, 2013, we completed a new senior secured term loan facility of $1 billion under the company's existing Second Amended and Restated Credit Agreement. In addition, Sears Canada announced two transactions related to the termination of its leases with respect to five stores for a total consideration of $400 million and the sale of its 50% joint venture interest in eight properties it owns with The Westcliff Group of Companies for approximately $315 million. Sears Canada also announced a cash dividend of approximately $509 million Canadian, of which our share will be approximately $260 million Canadian," Schrieshiem continued.

Lastly, we announced that we are evaluating separating both our Lands' End business and Sears Auto Center business. These actions are consistent with our objectives of becoming a more focused company that is easier to understand and manage, of allowing these businesses to pursue their own strategic opportunities and allocate capital in a more focused manner, of providing multiple opportunities for our shareholders to participate in the value created by these businesses and of potentially enhancing our financial flexibility, depending upon the transaction structure," he concluded.