Sears Swings to 1st-Quarter Loss After Year-Ago Asset Sales Gains
5/24/13 DJNF
By Nathalie Tadena
Sears Holdings Corp. (SHLD) swung to a fiscal first-quarter loss as the retailer recorded a large gain on asset sales a year earlier and as revenue and margins weakened in the latest period.
Shares tumbled 13% to $50.50 after hours. Through the close, the stock is up 41% since the start of the year.
Sears, controlled by billionaire hedge-fund investor Edward Lampert, in late 2011 year rolled out plans to sell a handful of stores and close more than 100 others in hopes of reversing a years-long stretch of falling same-store sales. The company has partially spun off Sears Canada Inc. (SEARF, SCC.T) and also completed the separation of its Hometown and outlet businesses.
Sears has been looking to draw in customers with more appealing stores, endeavors like a loyalty program and investing significantly in its online ecommerce platforms.
"Our recent financial performance has not been acceptable, although we have seen some positive momentum as sales per member increased and our online business grew 20% in the quarter," Mr. Lampert said.
The company last year said it was considering actions to raise at least $500 million of additional liquidity in 2013. Chief Financial Officer Rob Schriesheim said Thursday the company is currently in the process of evaluating strategic alternatives for its protection agreement business, including a possible sale.
A weak economy has also pressured demand for the retailer in recent periods. In the latest period, overall domestic same-store sales were down 3.6% as the company noted most of the U.S. experienced a cooler spring than last year. Same-store sales fell 2.4% at the Sears chain and 4.6% at sister discounter Kmart. Sears Canada's same-store sales were down 2.6%.
For the quarter ended May 4, Sears reported a loss of $279 million, or $2.63 a share, compared with a year-earlier profit of $189 million, or $1.78 a share. The latest period included a gain of $14 million on sales of assets, compared with $395 million in asset sales gains a year earlier.
Stripping out one-time items, per-share loss widened to $1.29 a share from a per-share loss of 51 cents a year earlier.
Revenue was down 8.8% to $8.45 billion, primarily due to the effect of having fewer Kmart and Sears full-line stores in operation, lower same-store sales and the separation of the Hometown and Outlet businesses.
Gross margin narrowed to 25.5% from 27.7%.
