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Sears Stock Rose 21.5% after Its Second-Quarter Results

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Sears stock 

On September 13, Sears Holdings (SHLD) stock was trading 21.5% higher in extended trading after the company announced its second fiscal quarter earnings. The company’s revenues of $3.2 billion declined 25.6% from the second quarter of fiscal 2017. Store closures continue to impact the company’s revenues.

Sears’ second-quarter EPS of -$4.68 was much wider than the EPS of -$2.33 in the second quarter of 2017.

Total comparable sales declined 3.9% in the second quarter compared to an 11.5% decline in the second quarter of 2017. In the first quarter, Sears’ comps declined 11.9%.

In the second quarter, the comps for July and August grew 3% and 2.5%. Sears stated that it witnessed positive comps for categories like footwear, apparel, and jewelry, which likely drove the stock on September 13.

Segment wise, Sears comps fell 4% on the second quarter, while Kmart’s comps fell 3.7%. The adjusted EBITDA was -$112 million—compared to the adjusted EBITDA of -$66 million reported in the same quarter of fiscal 2017.

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What lies ahead?

For some time now, Sears has been on a store closing spree as it tries to revitalize itself. Sears has identified 46 more stores that will close. As of August 4, Sears operated 866 stores.

Sears is cutting costs and focusing on specialty concept stores to boost its top line. The company announced that it was trimming support and corporate functions at Sears and Kmart to save an incremental $100 million.

Sears is also emphasizing its digital business through the “Shop Your Way” platform. The company partnered with Rocketmiles and launched Shop Your Way Hotels. The hotels will give members access to booking rooms at over 400,000 hotels across the globe. For each hotel booking, the member will get ~$50 cash back in “Shop Your Way” points.

Sears also announced that it has rolled out its ship-to-store tire solution in partnership with Amazon (AMZN) across its entire store base.

These measures might be too late for Sears. Widespread speculation suggests that bankruptcy is imminent. Since the company is bleeding cash, it has undertaken debt financing. Sears is divesting assets to pay back debt. In August, ESL Investments announced its intention to acquire the Kenmore brand for $400 million. ESL Investments also proposed the acquisition of Sears’ home improvement products business for $70 million. The board is still considering the proposal.

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