Sears Stock Falls 10.3% on First-Quarter Results



Stock falls

Sears Holdings (SHLD) stock was trading 10.3% lower at 7:33 AM EST after the company announced its first-quarter earnings today. The company’s revenue of $2.89 billion beat analysts’ estimate of $2.86 billion but declined 31.2% from the first quarter of fiscal 2017. Store closures remain the major factor decelerating revenue. The company’s first-quarter adjusted loss per share of $4.62 came in much worse than the $1.51 loss anticipated by analysts.

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Quarter in detail

Moreover, the company announced that it had identified another 100 non-profitable stores and will be closing 72 locations over the next few days.

As of May 5, Sears operated 894 stores (529 Sears domestic stores and 365 Kmart stores) versus 1,275 stores as of April 29, 2017.

For some time now, Sears has been on a store closing spree as it tries to revive itself. Sears is cutting costs and focusing on specialty concept stores to boost its financial performance. The company is also emphasizing its digital business through the “Shop Your Way” platform.

Nevertheless, these measures seem to be too little, too late. Widespread speculation suggests Sears will file for bankruptcy. The announcement of the potential sale of assets including its well-known Kenmore brand points toward a bleak future.

As the company is bleeding cash, in the first quarter, it raised $710 million in debt financing.

The company’s gross margin fell 130 basis points to 20.9%. Selling, general, and administrative expenses were down 25.8%, but the corresponding expense rate expanded 220 basis points due to lower revenue. Consequently, the company reported an operating loss of $217 million, compared with operating profit of $349 million in the first quarter of fiscal 2017.

On a reported basis, the loss per share of $3.93 compares with EPS of $2.29 in the first quarter of fiscal 2017. That quarter included a gain from the sale of the Craftsman brand.


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