Sears Holdings posted a profit in the fourth quarter following the new tax reform laws, although comp sales continued to tumble.
For the 14-week fourth quarter ended February 3, Sears Holdings posted company net income of $182 million, or $1.69 per diluted share, versus a net loss of $607 million, or $5.67 per diluted share, for the 13-week prior-year period.
Fourth quarter results included a non-cash tax benefit of approximately $470 million related to tax reform, as well as a non-cash accounting charge of $72 million related to the impairment of the Sears trade name, while results in the year-earlier period included a non-cash accounting charge of $381 million related to the impairment of the Sears trade name.
Comparable sales decreased 15.6% in the quarter year over year, with Kmart comps down 12.2% and Sears comps down 18.1%.
Revenues for the quarter were $4.38 billion and merchandise sales were $3.59 billion versus $6.05 billion and $5.13 billion, respectively, in the year-previous period. Operating loss was $207 million versus an operating loss of $717 million in the year-before quarter.
In the fourth quarter and the beginning of this fiscal year, Sears indicated that it took steps to increase financial flexibility including extending loan maturity and amending financial terms as well as raising new financing.
For the full fiscal year, Sears Holdings posted a company net loss of $383 million, or $3.57 per diluted share, versus a net loss of $2.22 billion, or $20.78 per diluted share, in the year prior.
In the fiscal year, comps declined 13.5%, with Kmart comps down 11.4% and Sears comps down 15.2%.
Revenues for the fiscal year were $16.7 billion and merchandise sales were $13.41 billion versus $22.14 billion and $18.24 billion, respectively, in the year previous. Operating loss was $207 million versus an operating loss of $717 million in the year-before.
Rob Riecker, Sears Holdings CFO, said, “As we continue with our transformation efforts, Sears Holdings has taken a number of actions to improve financial flexibility and support our operations. In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, we are taking incremental actions to further streamline our operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.”
Edward Lampert, Sears Holdings chairman and CEO, said, “We made progress in 2017, with a return to positive adjusted EBITDA and another quarter of year-over-year improvement in our financial results. We also took the actions necessary to increase our liquidity and fund our ongoing transformation of the company. In addition, we entered important partnerships, such as our agreement to sell Kenmore appliances and related services through Amazon, that broaden the reach of our brands. Finally, we continued to enhance our Shop Your Way ecosystem to offer our members more compelling and uniquely tailored value and shopping experiences.”
He added, “We also recognize that we need to do more if we are to deliver on our commitment to return to profitability in 2018. We will work to build on the progress we made in 2017, including ongoing actions to improve or close unprofitable stores and to unlock the value in our assets. Importantly, to ensure our long-term viability, we must substantially improve our sales and gross margin performance, including adjustments to our business model.”