HOFFMAN ESTATES, Ill., Aug. 16, 2012 /PRNewswire/ -- Sears
Holdings Corporation ("Holdings," "we," "us," "our" or the
"Company") (
SHLD
) today reported its second quarter 2012 results. In summary, we
reported:
- Adjusted EBITDA increased $95 million for the quarter to
$153 million in 2012 versus $58 million in 2011. Domestic
EBITDA increased $114 million ($144 million in 2012 versus $30
million in 2011). Sears Canada's EBITDA declined $19 million
($9 million in 2012 versus $28 million in 2011);
- For the quarter, margin rate increased 100 basis points and
selling and administrative expenses declined;
- Net loss from continuing operations attributable to
Holdings' shareholders for the second quarter of $132 million
($1.25 loss per diluted share) and $152 million ($1.42 loss per
diluted share), in 2012 and 2011, respectively. The second
quarter included an effective tax benefit rate of 39.3% in 2011
versus a benefit rate of 15.8% in 2012;
- Adjusted loss per diluted share from continuing operations
for the second quarter of $0.86 in 2012 and $1.18 in 2011;
- Sears Domestic's comparable store sales declined 2.9% in
the second quarter of 2012, Kmart's comparable store sales
declined 4.7%, and Sears Canada's comparable store sales
declined 7.1%;
- Continued discipline of our inventory with domestic
inventory declining $512 million from the prior year balance;
- Liquidity of $3.1 billion with cash balances of $738
million and nearly $2.4 billion of capacity on domestic and
Canadian revolving credit facilities, as well as Sears Hometown
and Outlet Store transaction on track to raise $446.5 million
of gross proceeds; and
- Partial spin-off of our interest in Sears Canada expected
to close in the second half of 2012 with distribution to our
shareholders.
Lou D'Ambrosio, Sears Holdings' Chief Executive Officer and
President, said, "We continue to make progress against the
priorities we outlined in our fourth quarter earnings release and
call. In particular, we have improved our profit position, as we
reduced expenses and expanded margin rate through more effective
promotional design. We have also successfully lowered inventory,
reduced debt from year end, and enhanced our liquidity. In
addition, the Sears Hometown transaction remains on track to
close in the third quarter. While we drive operational
discipline, we are also investing in our customer experience,
particularly through our
ShopYourWay
membership program and Integrated Retail. Our focus is on
providing clear benefits to our members and customers, and
delivering an excellent and seamless experience across the store,
online, mobile and in the home."
Second Quarter Revenues and Comparable Store
Sales
Revenues decreased $671 million to $9.5 billion for the quarter
ended July 28, 2012. The decline in revenue was primarily due to
lower domestic comparable store sales for the quarter and the
effect of having fewer Kmart and Sears Full-line stores in
operation. Sears Canada's comparable store sales also decreased
and included a decline of $55 million due to changes in foreign
currency exchange rates.
Domestic comparable store sales declined 3.7%, comprised of
declines of 2.9% at Sears Domestic and 4.7% at Kmart, and were
driven by four primary factors. The largest impact was in
consumer electronics, which continues to be negatively impacted
by price compression. Lawn and garden also declined due to
drought conditions experienced throughout the country. Part of
the decline was due to lower clearance sales activity primarily
in the apparel categories due to improved inventory positions in
seasonal merchandise. Lastly, pharmacy sales declined due to a
conversion of brand name drugs to equivalent generic drugs. The
aforementioned items accounted for over half of the decline at
Kmart and adjusted for these items, Sears Domestic comparable
store sales were up over the prior year. Sears Canada's
comparable store sales decreased 7.1% for the quarter primarily
due to sales decreases in women's apparel, tools and lawn and
garden, home decor and men's apparel partially offset by improved
performance in home appliances and mattresses.
Operating Loss
Operating loss was $103 million and $191 million for the quarters
ended July 28, 2012 and July 30, 2011, respectively. The
improvement in operating loss of $88 million was due to the
reduction in selling and administrative expenses and an
improvement in gross margin rate, which was partially offset by a
decline in gross margin dollars driven by lower overall sales.
For the quarter, our gross margin decreased $70 million to $2.5
billion in 2012. The decrease was primarily driven by declines at
Sears Canada. Sears Canada's gross margin decreased due to the
decline in overall sales, as well as margin rate and included a
decrease of $16 million related to the impact of foreign currency
exchange rates. Gross margin at Kmart declined despite an
increase in margin rate. Sears Domestic's gross margin improved
as margin rate increases more than offset the decline in overall
sales. Gross margin for 2011 included charges of $22 million
related to store closures.
Sears Canada's gross margin rate declined 180 basis points for
the second quarter as a result of rate declines in electronics,
jewelry, accessories and luggage, fitness and recreation. Kmart
and Sears Domestic's gross margin rates improved 60 basis points
and 210 basis points, respectively, during the second quarter
mainly due to lower clearance activity in the apparel business.
Kmart and Sears also benefited from improved margins in the toys
and home appliance categories, respectively.
Domestic selling and administrative expenses decreased $123
million in the second quarter of 2012 compared to the second
quarter of 2011 predominately due to decreases in payroll and
advertising expenses, which were partially offset by higher
pension expense. Selling and administrative expenses included
expenses related to domestic pension plans, store closings and
severance of $59 million and $36 million for 2012 and 2011,
respectively. Selling and administrative expenses at Sears Canada
for the quarter decreased $41 million compared to the prior year
quarter, and included a decrease of $15 million related to the
impact of foreign currency exchange rates. On a Canadian dollar
basis, selling and administrative expenses decreased by $26
million, primarily driven by decreases in advertising and payroll
expenses.
Continue reading.
Read More:
About GuruFocus: GuruFocus.com tracks the stocks picks and
portfolio holdings of the world's best investors. This value
investing site offers stock screeners and valuation tools. And
publishes daily articles tracking the latest moves of the world's
best investors. GuruFocus also provides promising stock ideas in
3 monthly newsletters sent to
Premium Members
.