Deep Q1 Loss Accelerates Sears Store Closings

Sears Holdings Corp. posted a deeper net loss in a challenging first quarter and said it would close more stores. In addition, the company developed another deal with Amazon.

For the first quarter ended May 5, Sears posted a company net loss of $424 million, or $3.93 loss per diluted share, versus company net income of $245 million, or $2.29 per diluted share, for the 2017 period, which included a gain of $492 million from the sale of the company’s Craftsman brand. An analyst average estimate published by MarketBeat.com called for a loss per diluted share of $1.51.

Comparable sales fell 11.9% during the first quarter including a 9.5% decline at Kmart and a 13.4% decline at Sears stores year over year. Despite the overall decline, that company indicated that it experienced positive comps at both Kmart and Sears stores in some categories versus the period a year earlier, with apparel, footwear and jewelry up.

Total revenues were $2.89 billion versus $4.2 billion in the year-earlier quarter, with store closures contributing to about two thirds of the decline, according to Sears. Merchandise sales declined to $2.21 billion versus $3.33 billion in the period year over year. Operating loss was $217 million versus an operating profit of $349 million in the year-before period.

Sears identified about 100 non-profitable stores, 72 of which would begin closing sales in the near future. The company added that it would evaluate its store portfolio and make further adjustments as warranted.

In addition, Sears stated that it continues to develop deals that it feels wills strengthen its operations including a collaboration with Amazon.com launched in the first quarter that will provide full-service tire installation and balancing for customers who purchase any brand of tires on Amazon.com. Sears Auto is the first nationwide auto service center to offer Amazon customers a ship-to-store tire solution integrated into the Amazon.com checkout process. At the same time, Amazon will sell DieHard all-season passenger tires on its site. Sears asserted that the program with Amazon builds on the success of its earlier launches of Kenmore and DieHard products on Amazon, expanding the reach of the labels.

Edward Lampert, Sears chairman and CEO, said, “In a challenging quarter, we continued to focus on our strategic transformation, identifying additional opportunities to streamline operations and adjust inventory and operating expenses while staying focused on our best members, best categories and best stores. Our Shop Your Way membership program and integrated retail strategy are our key priorities, and we continue to look for new ways to leverage our Shop Your Way ecosystem to drive improvements in value for our members and to increase the frequency and amount of their engagement.”

In looking forward, Lampert said, Sears remains “committed to restoring positive adjusted EBITDA and will continue to explore opportunities to unlock the full potential of our assets for our shareholders. This includes exploring third-party partnerships involving several of our businesses, such as Sears Home Services, Innovel, Kenmore and DieHard, and gaining further momentum around our new smaller store formats that blend brick and mortar and online experiences. We believe these initiatives, among others, will help us to strengthen the company and better position it for the future.”

As previously announced, Sears Holdings has formed a special board of directors committee to initiate a formal process to explore the sale of its Kenmore brand and related assets, as well as the Sears Home Improvement Products and Parts Direct business of its Sears Home Services division.