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What Analysts Project for Sears’s First-Quarter Earnings

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May. 16 2018, Published 1:00 p.m. ET

Analyst projections

Sears Holdings (SHLD) is expected to announce first-quarter results on May 23. Wall Street estimates the company will report a gross margin of 21.7%, up 20 basis points on a YoY (year-over-year) basis. Analysts expect SG&A (selling, general, and administrative) expenses to fall ~28.7% to $817 million.

For the first quarter, analysts expect adjusted EPS of -$1.51 as against adjusted EPS of -$2.15 in the first quarter. Sears continues to slash costs, and it expects to achieve $200 million in savings in 2018 driven by its streamlining efforts. The figure mentioned above doesn’t include the positive impact of its store closings.

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Recap of past performance

On a YoY basis, Sears’s gross margin for the fourth quarter of 2017 contracted 20 basis points to 21.1% due to the lower merchandise margin. The company’s SG&A expenses were down 26.8% to $1.2 billion, but its SG&A expense rate rose by 30 basis points due to lower revenue. Its reduction in total costs and expenses including lower impairment charges helped it to post a narrower operating loss in the fourth quarter. Its operating loss was $207 million compared to $717 million in the fourth quarter of 2016.

Adjusted EPS of -$1.41 was much lower than the adjusted EPS of -$1.28 in the prior-year quarter. The decline in revenue offset the benefits achieved from reduced expenses. On a reported basis, Sears reported EPS of $1.69, better than its EPS of -$5.67 in the fourth quarter of 2016 driven by tax reform benefits.

Expectations for peers

For the first quarter, analysts expect Kohl’s (KSS) to post adjusted EPS growth of 28.2% to $0.50. Kohl’s management has projected EPS to be in the range of $0.45–$0.50 as against the $0.39 it reported in the first quarter of 2017.

For the first quarter, analysts expect JCPenney (JCP) to report adjusted EPS of -$0.23 when compared with the adjusted EPS of -$0.30 in the first quarter of 2017.

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