Sears achieves its first quarterly profit since 2015
Long struggling retailer still facing sluggish sales despite its recent gains
NEW YORK— Sears Holdings Corp. rallied after posting its first quarterly profit since 2015, bringing a ray of optimism to a retail chain struggling to regain its relevance.
First-quarter net income amounted to $244 million (U.S.), compared with a loss of $471 million a year earlier. The gain reflects efforts by chief executive officer Eddie Lampert to sell assets and raise cash. But its main business — running the Sears and Kmart department stores — still struggled in the latest quarter. When excluding one-time items, the company posted a loss.
Investors took the results as a sign that Lampert’s turnaround bid is making some headway. The 54-yearold hedge fund manager, who is also Sears’s largest investor, has scrambled to wring money from the sprawling chain’s real estate and close stores. On Tuesday, the company made a deal that pushed the due date for $400 million in debt from July to January. It also off-loaded some of its pension obligations.
“While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing,” Lampert said in a statement. “We recognize that we need to accelerate our efforts to improve our operational performance.”
The stock climbed as much as 27 per cent to $9.45 in New York trading, the biggest intraday gain since Feb. 10. The rally followed a 20-percent decline this year.
Sears’s sales remain in a dire state. Revenue fell 20 per cent to $4.3 billion in the latest period. And when earnings were adjusted for one-time items, the company posted a loss of $230 million. Much of the revenue decline stemmed from Sears operating fewer stores. But the company also posted a comparable-store sales decline of12 per cent — roughly twice as large as in the year-ago quarter. These socalled comp sales are a closely watched measure because they exclude stores that opened or closed in the previous year.
With a shrinking store base and less advertising, Sears remains in a worse position than it was a year ago, said Matt McGinley, an analyst at Evercore ISI.
“Sears continues to be less relevant with potential customers, vendors and landlords,” McGinley said. “They’re in a really tough spot from pretty much every angle.”
Despite Sears’s rally, McGinley said he doesn’t see much cause for optimism in the current results. He pointed to the almost $900 million in cash used for operating activities in the quarter.
The first-quarter net income was the first profit since the second quarter of 2015, when the creation of a real estate investment trust generated about $2.7 billion for Sears.