Sears Holdings Corporation
) reported its fourth-quarter fiscal 2012 adjusted earnings of
$1.12 per share, higher than the year-ago comparable quarter's
earnings of 54 cents. Including special items, the company's
reported loss reached $4.61 per share compared with a loss per
share of $22.47 posted in the prior-year period.
The robust bottom-line comparisons from last year resulted
from the company's ongoing cost reduction initiatives, which
helped it bring down selling and administrative expenses during
the quarter. Additionally, the company has managed to effectively
reduce merchandise inventory levels to $7.6 billion at the end of
the fiscal compared with $8.4 billion at the end of fiscal
During fiscal 2012, the company's adjusted loss per share
narrowed to $2.03 from $4.52 from fiscal 2011.
Revenues inched down 1.8% to $12,260 million compared with
$12,484 million in the year-ago quarter, primarily due to
separation of Sears Hometown and Outlet business, reduction in
the number of Kmart and Sears's full-line stores in operation
during the quarter as well as lower domestic comparable store
sales. Revenue for full fiscal 2012 decreased 4.1% year over year
to $39,854 million.
The company witnessed a 1.6% decline in Domestic comparable
store sales, primarily attributable to a fall of 3.7% at Kmart
stores, which was partially offset by an improvement of 0.8% at
Sears Domestic stores. The decline at Kmart was driven by weak
performance in the consumer electronics, grocery & household
and pharmacy categories.
However, comps at Sears Domestic benefited from increases in
the apparel, home appliance and home categories, partially offset
by soft sales in the consumer electronics, sporting goods, Sears
Auto Centers and lawn & garden categories.
Segment wise, sales at Sears Domestic inched down 0.9% to
$4,697 million, while Kmart sales declined 2.3% to $4,697
million. Moreover, sales at Sears Canada registered a decline of
1.9% to $1,310 million.
On a reported basis, gross profit improved $101 million to
$3,163 million compared with $3,062 million reported in the
fourth quarter of fiscal 2011. Consequently, gross profit margin
expanded 130 basis points to 25.8%.
The company's selling and administrative expenses climbed
12.4% to $3,282 million, primarily due to increased expenses
related to pension plans, store closures and store impairments
Adjusted EBITDA stood at $429 million, improving $78 million
from the year-ago comparable quarter. We believe that accelerated
strategic actions, including introduction of new offers, honed
pricing, effectively managed costs and implementation of better
inventory management in the Appliances, Apparel, and Home
Services, led to the growth in EBITDA.
Balance Sheet and Cash Flow
Sears Holdings ended the fiscal with cash and cash equivalents
(including restricted cash) of $618 million and long-term debt
and capitalized lease obligations of $1,943 million compared with
a cash balance of $754 million and long-term debt and capitalized
lease obligations of $2,088 million at the end of fiscal 2011.
The company's shareholder equity stands at $3,172 million at the
end of fiscal 2012.
Measures to Revive Operational Activities
Sears has long been grappling with weak top-line performances
and even weaker bottom-line results. However, the measures
undertaken to revive the operating performance are showing some
signs of improvement as is evident from the company's EBITDA
growth and narrower GAAP loss per share from the prior-year
The company continues to take the actions necessary to create
value and retain the flexibility to invest in its strategic
priorities. Further, in an effort to enhance its liquidity
position, the company completed the partial spin-off of 45% of
Sears Canada's common shares to its shareholders on Nov 13,
The company also successfully completed the separation of
Sears Hometown and Outlet Stores Inc. on Oct 11, 2012, raising
$446.5 million in gross proceeds.
Other Stocks to Consider
Sears Holdings currently holds a Zacks Rank #3 (Hold). Other
stocks worth considering in the departmental store industry are
). All these stocks hold a Zacks Rank #2 (Buy).
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