Sears Holdings Corporation
) reported third-quarter 2012 adjusted loss of $1.99 per share,
narrower than the loss per share of $2.55 reported in the
prior-year quarter. Including special items, the company reported
loss of $4.70 per share compared with a loss of $3.85 per share
posted in the prior-year period.
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The robust bottom-line comparisons from last year resulted from
the company's ongoing cost reduction initiatives, which helped to
lower selling and administrative expenses during the quarter,
offset by a decline in sales that pulled down gross profits.
Additionally, the company has managed to effectively reduce
merchandise inventory levels to $9.6 billion at the end of the
quarter compared with $10.9 billion at the end of third-quarter
Revenue for the quarter decreased 5.8% to $8,857 million compared
with $9,405 million in the prior-year quarter, driven by the
reduction in the number of Kmart and Sears full-line stores in
operation during the quarter as well as lower domestic comparable
The company witnessed a 3.1% decline in Domestic comparable store
sales, including a fall of 1.6% and 4.8% at Sears Domestic and
Kmart, respectively. The decline at Sears Domestic and Kmart was
driven by weak performance in the consumer electronics, Grocery
and household, Lawn and garden and pharmacy categories. However,
comps benefited from increases in the apparel and home appliance
Moreover, comparable store sales at Sears Canada registered a
slump of 5.7% in the quarter as sales declined in the snow
throwers, women's apparel, electronics, men's apparel and home
décor categories, offset by improvements in home appliances and
Segment wise, sales at Sears Domestic dropped 4.6% to $4,724
million, while Kmart sales declined 7.8% to $3,081 million.
Moreover, sales at Sears Canada registered a decline of 5.1% to
Adjusted EBITDA for the third quarter of 2012 was a loss of $156
million, improving $34 million from the prior-year quarter.
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 EBITDA growth.
Balance Sheet and Cash Flow
Sears Holdings ended the quarter with cash and cash equivalents
of $622 million and long-term debt and capitalized lease
obligations of $1,960 million compared with a cash balance of
$591 million and long-term debt and capitalized lease obligations
of $2,073 million at the end of the prior-year period. The
company's shareholder equity stands at $3,901 million at the end
of the third-quarter 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 loss per share from the prior-year quarter.
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 the company's shareholders on
November 13, 2012.
The company also successfully completed the separation of Sears
Hometown and Outlet Stores Inc. on October 11, 2012, raising
$446.5 million in gross proceeds.
Sears Holdings, which competes head-to-head with
Wal-Mart Stores Inc.
), currently has a Zacks #3 Rank, implying a short-term Hold
rating. The company retains a long-term Neutral