One of the leading broad line retailers in the United States,
Sears Holdings Corporation
) has recently provided an update on its fourth-quarter to-date
results for the period ended on December 29, 2012. Apart from
this, the company provided outlook for the fourth quarter and
The company's total comparable-store sales (comps) for the
nine-week period ended on December 29, 2012, declined 1.8%
primarily due to weak performance at its consumer electronics
category. Comps at Sears Domestic inched up 0.5%, while comps at
Kmart stores fell 3.8%.
The increase in comps at Sears Domestic was primarily driven
by continued momentum in its apparel category. A massive sales
fall in consumer electronics along with a decline in pharmacy,
grocery & household and drug categories dragged down comps at
Comps at the company's subsidiary, Sears Canada, declined 5.8%
during the nine-week period primarily due to unfavorable weather
conditions in most parts of Canada.
The company now expects adjusted EBITDA for the
fourth-quarter, ending February 2, 2013, to be between $365
million and $465 million of which, adjusted EBITDA from Sears
Domestic is anticipated to be in the range of $325-$395 million.
Moreover, adjusted EBITDA at its Sears Canada subsidiary is
expected to be down 50% from the year-ago quarter's level.
For the fourth quarter, Sears Holdings anticipates loss per
share in the range of $2.64-$3.40, on a reported basis. However,
excluding non-cash charges and one-time expenses related to
pension, Sears Holdings expects earnings per share between $1.25
Sears Holdings expects adjusted EBITDA for the fiscal year
ending February 2, 2013 to be in the range of $560 to $660
million. Further, on a reported basis, loss per share is expected
to be in between $6.80 to $7.56.
However, excluding charges related to pension, store closure
and restructuring activities, loss will come in the band of
$1.16-$1.92 per share. Currently, the Zacks Consensus Estimate
stands at loss per share of $2.91.
As of December 29, 2012, the company's net debts were $2.4
billion, almost $400 million lower than the year-ago comparable
period. Cash increased to $1.1 billion from $0.9 billion.
The company continues to take the actions required to create
value and retain the flexibility to invest in its strategic
priorities. Continuing with its strategy of asset
re-configuration, Sears Holdings has generated $1.8 billion worth
The cash-strapped Sears Holdings announced a string of
measures to enhance its growth prospects by reducing investments
in those sections, which no longer contribute significantly to
its growth. These measures are mainly focused on optimizing the
company's financial performance.
The company expects to create nearly $500 million of
additional liquidity over a period of one year. Further, it will
generate about $300 million in cash by reducing its inventory
level by $500 million in 2013. Sears Holdings is expecting to
lower its fixed cost expenses by $200 million in 2013.
In a separate announcement, the company revealed that Edward
S. Lampert will be the new Chief Executive Officer (CEO) form
February 2, 2013, in addition to his existing role of Chairman of
the Board of Directors. The current CEO, Louis J. D'Ambrosio has
decided to give up his role due to his family health issues.
Though the abovementioned traits project an overwhelming
picture of Sears positioning itself for incremental future
growth, we remain a little concerned about the performance of the
company's divisions - Kmart stores and Sears Canada. These
divisions have been posting significant comps decline over the
past few quarters.
The business at Kmart stores have been severely hit by
Wal-Mart Stores Inc.
) and other dollar stores' aggressive pricing and expansion
strategies as these players are significantly increasing their
store count in Kmart's markets.
Moreover, intense competition, macroeconomic issues and
exposure to adverse foreign currency translations may undermine
Sears' future operating performance. Thus, the company retains a
Zacks Rank #4, implying a short-term Sell rating.
SEARS HLDG CP (SHLD): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.