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Sears' 2Q Revenue -6%, Loss Jumps to $194M

Aug 22, 2013 8:52 AM   By Jeff Miller
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RAPAPORT... Sears Holdings reported that its revenue slipped 6.3 percent year on year to $8.87 billion for the second quarter that ended on August 3. Comparable-store sales in the U.S. fell 1.5 percent, while same-store sales fell 2.5 percent in Canada. Sears stated that revenue contracted in large part due to fewer full-line department stores in operation compared with one year ago. The retailer reduced costs of sales by 3.6 percent to $6.69 billion; however, the gross margin rate fell to 24.6 percent from 26.7 percent. Net loss attributed to shareholders surged 47 percent to $194 million, or $1.83 per share, in the quarter.

The second quarter included gains on the sale of certain stores of $58 million, after tax and noncontrolling interest and  generated approximately $277 million of cash proceeds. 

"We made meaningful progress this quarter in our transformation to a member-centric company. Shop Your Way members represented over 65 percent of our sales and they redeemed rewards points at a significantly higher rate than last year. While the increase in Shop Your Way promotional activity and member redemptions resulted in a meaningful increase in our costs, it demonstrates that our members are deepening their engagement with our program which will allow us to further accelerate our transformation," said Eddie Lampert, Sears Holdings' chairman and CEO.  "At the same time, we recognize how important it is to improve the profitability of our company and I am disappointed that we did not deliver a better result."

Online sales at sears.com and kmart.com surged 20 percent year on year, according to the retailer. Overall,  Sears observed decreased sales in its consumer electronics and toy departments, which were  partially offset by increases in revenue from apparel,  footwear and lawn and garden categories.

Rob Schriesheim, the company's chief financial officer, explained that Sears'  financial flexibility remains strong with cash of approximately $700 million,  credit facilities of approximately $1.6 billion and inventory, net of payables, of approximately $4.8 billion.

''During the first half, we generated approximately $290 million of proceeds from real estate transactions. While we believe that we continue to have potential options relating to our protection agreement business, we have not decided what actions, if any, to take with regard to this business. Regardless of the outcome of this process, we have made significant progress toward our goal to raise at least $500 million of additional liquidity in 2013. With regard to the objectives we outlined in our February earnings release, we remain on track to reduce 2013 peak domestic inventory by $500 million from the 2012 level of $8.6 billion at the end of the third quarter as a result of stores already or expected to be closed, initiatives underway to reduce slow-moving inventory and modest productivity improvement. This action is expected to generate $300 million of cash after consideration of related payables. We also expect to further reduce our fixed cost base by another $200 million, much of which will occur in the second half,'' Schriesheim said.

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Tags: cash, closings, Debt, inventory, Jeff Miller, Kmart, loss, revenue, sears
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