Sale of assets will likely keep chain afloat while it works on recovery.
After reported its 20th straight quarterly sales and revenue miss, Sears Holding Corp. has announced that it will accelerate the closing of unprofitable stores to combat declines. Same-store sales fell 7.4 percent in Q3 2016, the weakest results so far this year, with Sears’s same-store sales falling 10 percent and Kmart same-store sales falling 4.4 percent, missing analyst expectations for a 5.3 percent decline.
Additionally, third quarter revenue fell 12.5 percent to $5.03 billion and Q3 adjusted losses were $3.11 per share. A Thomson Reuters estimate from one analyst had estimated a loss of $4.06 per share on $4.95 billion in revenue.
In a prerecorded conference call, Sears CFO Jason Hollar said the company plans to raise capital by selling off its Kenmore, Craftsman and DieHard brands and its Home Services business and reduce the investment in underperforming merchandise categories. According to Hollar, the retailer’s resources, which include real estate, investments from CEO Eddie Lampert’s hedge fund and the potential sale of key brands and businesses, will help the company realize its strategic goals.
"We continue to believe that the opportunity to perform better is right in front of us, but we have to convert that belief to reality," Hollar said. "The retail environment has continued to be challenging for many traditional retail companies but we will not use that as an excuse. We need to perform better and we are taking actions, large and small, to achieve better performance."
In September,Moody’s analysts predicted that the Kmart brand was in danger of closing altogether, and experts have been predicting the “demise” of Sears for years now, following 10 years of declining in-store sales, but somehow the retailer is still hanging on. Moody’s analysts asserted that, despite Sears’ sizeable asset base, “its debts are significant with approximately $3.5 billion of funded debt as well as an unfunded pension and post-retirement obligation of $2.1 billion,” making a recovery doubtful at this time.
Meanwhile, other retailers are taking advantage of Sears’ retreat from the malls. JCPenney has entered the appliance game again, hoping to capitalize on the appliance game as Sears’ leaves a new hole in many malls.
"Sears is donating share in appliances" as it closes stores, JCPenney CEO Marvin Ellison told the Dallas News. Penney's high penetration of women shoppers, about 70 percent of its customers, is expected to be a plus in the new appliance push, he said.
"We have no aspirations to be No. 1 in market share for appliances," Ellison said. "To do that, we have to own the inventory. But we think we can be disruptive and can be convenient to our customers."
