Sears posts profit, but sales keep slipping
Helped by the sale of its Craftsman tool unit, Sears Holdings showed a profit during its first quarter but saw lower sales as it took financial steps to reach stability.
Sears posted net income of $ 244 million for the quarter ended April 29, or $ 2.28 a share, compared with a loss of $ 471 million, or $ 4.41 a share, in the same quarter last year. But counting special items, Sears posted a net loss of $ 230 million, or $ 2.15 per diluted share, compared with a $ 199 million net loss, or $ 1.86 per diluted share in the same period in 2016.
While acknowledging “this was certainly a challenging environment,” CEO Edward Lampert noted in a statement the company is working to return to a solid financial footing. “We recognize that we need to accelerate our efforts to improve our operational performance.”
Sears is shrinking as it deals with a dramatically changed retail environment in which consumers increasingly shop online.
Sears recently announced a debt restructuring, but it is yet to be seen if it will be enough to help the iconic retailer turn the tide. The latest earnings provided a glimmer of hope for investors.
“The market has reacted positively to a less- worse set of results than expected,” says Neil Saunders, managing director of retail analysis firm Global Data. Sales declines at stores open at least a year were “not as bad as feared, and an exceptional windfall from the sale of the Craftsman brand helped push the group into profit. All that said, the market’s re- action may well be short term. The results were still dire.”
After announcing at the start of the year it would shutter 150 underperforming stores, Sears recently added at least 30 locations to the list. Those closed stores helped lead to an 11.9% dip in sales at locations open for at least a year and a plunge in quarterly revenue to $ 4.3 billion from $ 5.4 billion in 2016.
The retailer has increased its savings goal to $ 1.25 billion from $ 1 billion. Among the many steps it’s taking to reverse its financial slide is selling off pieces of its extensive real estate holdings and selling its Craftsman brand for more than $ 900 million.
Traditional retailers are in trouble, with chains such as Macy’s and JCPenney reporting limp revenue at the start of the year and stores continuing to close.
But Sears’ troubles have been years in the making. It has struggled in the aftermath of management decisions that led to the sale of its more than $ 30 billion credit portfolio to Citibank in 2003 and a merger with another struggling retailer, Kmart, in 2004.