Sears to close 72 unprofitable stores after missing market's fiscal 1Q profit estimate

The beleaguered retailer is targeting 100 of its loss-making stores and will start the process of closing 72 of them imminently
Sears storefront
CEO Eddie Lampert says smaller stores with a bigger online presence are being considered

Investors sent shares of the beleaguered Sears Holding Corporation (NASDAQ:SHLD) plunging in pre-market trade after the home retailer missed the market’s fiscal first-quarter profit estimate by a mile and said it would be closing 72 unprofitable Sears and Kmart stores this year.

For its first quarter ended May 5, Sears posted a net loss of US$424mln or US$3.93 per share, which fell far short of the consensus estimate of a loss of US$1.51 per share.

The company’s revenue came to US$2.9bln in the first quarter, which also missed the consensus estimate of US$2.86bn.

The retailer is targeting 100 of its loss-making stores, which also include Kmart outlets, and will start the process of closing 72 of them in the "near future."

“We continue to evaluate our network of stores, which are a critical component in our transformation, and will make further adjustments as needed and as warranted,” the company said.

Sales at Kmart and Sears were dismal in the quarter. Total comparable store sales dropped by 9.5% at Kmart while Sears saw a 13.4% decline.

Sears shares dropped 7.5% to US$2.97 in pre-market trade and are off by 15% since mid-May.

READ: Sears gathers special committee to review asset sales, including its Kenmore brand

Earlier this month, the company formed a special committee to explore asset sales in its latest move to claw back to profitability.

The committee will review a proposal from ESL Investments, the hedge fund run by its CEO Eddie Lampert, to buy some of the iconic retailer’s assets.

The segments possible up for sale include the Kenmore appliance brand, the Sears home improvement products division and the parts direct division.

“We remain committed to restoring positive adjusted EBITDA and will continue to explore opportunities to unlock the full potential of our assets for our shareholders,” said Lampert in a statement. “This includes exploring third-party partnerships involving several of our businesses- such as Sears Home Services, Innovel, Kenmore and DieHard.”

To salvage its business and stave off bankruptcy, Lampert said that Sears is also considering smaller stores that blend traditional retailing with a bigger online presence.

As of the close of May, Sears had US$360mln under its revolving credit facility and US$281mln under its general debt basket.

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Article
January 10 2018

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