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Sears Holdings to accelerate closure of unprofitable stores - USA
Sears Holdings to accelerate closure of unprofitable stores - USA

Sears Holdings to accelerate closure of unprofitable stores - USA

INTERNATIONAL NEWS

ChainStoreAge.com - Feb 10th 2016, 10:22

A combined 7.1% same-store sales decline at Sear and Kmart stores in the fourth quarter has parent company Sears Holdings vowing to undertake a wide range expense reduction and cash generating moves, including more store closings and asset sales. 

Sears Holdings preannounced weak fourth quarter sales results and an anticipated net loss of between $525 million and $625 million ahead of its earnings release scheduled for 25 February. Same store sales declined 7.2% and 6.9% at Kmart and Sears domestic stores, respectively. The company said it expects fourth quarter revenues to total $7.3 billion and full year revenues to reach $25.1 billion.

“We entered the holiday selling season with key product offerings and promotions intended to build engagement with our members and provide them with the best experience possible,” the company said in a statement release 9 February. “The holiday selling season proved to be challenging, with historically warm weather and intense competition pressuring margins and driving comparable store sales declines, particularly in our apparel and related softlines businesses.”

Ironically, the company’s weak fourth quarter showing was an improvement from earlier in the year as sales declined 7.3% and 11.1% at Kmart and Sears, respectively, for a full year blended total of negative 9.2%.

“Our fourth quarter comparable store sales showed an improvement from the trend in the first three quarters, and January 2016 was our best monthly comparable store sales performance of the year,” the company said, disclosing that January comps declined -4.5%.

The company also sought to put a positive spin on its net loss, by noting that earnings before interest taxes, depreciation and amortisation (EBITDA) on an adjusted basis only declined $50 million to $100 million during the fourth quarter, which was better than a $125 million loss during the comparable period the prior year.

“The operating performance of our apparel business has a substantial impact on our overall profitability, and, in 2016 and future periods, we intend to improve the performance of our apparel business through changes to our sourcing, product assortment, space allocation, pricing and inventory management practices,” according to the company.

In addition to the promise of wide ranging changes to the apparel business, Sears Holdings indicated that pretty much everything is on the table when it comes to improving liquidity and reducing expenses. For example, the company said it would accelerate the closing of unprofitable stores, including, but not limited to, roughly 50 stores expected to close in the next few months.

“We also intend to continue to evaluate and optimise our cost structure, including optimising store-level marketing expenditures and overall staffing levels, and we will be taking action to reduce our fixed costs, and to improve our inventory management and gross margin realisation,” the company said.

In 2016, Sears Holdings’ plans call for a reduction in expenses between $550 million to $650 million following 2015 expense reductions in the range of $765 million to $790 million. In addition to the expense actions and store closing, Sears Holdings said it is targeting at least $300 million of other asset sales during the first half of the year in addition to ongoing efforts to sell the Sears Auto Business. The company also said, if needed, it has the ability to have to raise billions under various financial instruments.

“Our intention is not to borrow money to fund continued operating losses, but instead to provide us flexibility as we transition from a traditional network based model to a more asset light member-centric integrated retailer leveraging our Shop Your Way program,” the company said. “As part of this transformation, we intend to optimise the value of our assets and to take actions that will generate positive adjusted EBITDA in the near future. Generating positive adjusted EBITDA is our most important focus during 2016.”

Doing so, the company cautioned, may require taking actions over-and-above those detailed in the fourth quarter pre-announcement.From ChainStoreAge.com 

Read more about: usa | sears holdings |

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