Sears in Q2: Cutting costs and closing stores

Sears Holdings Corp.'s second-quarter earnings beat the Street as it benefitted from cost-saving initiatives. But it continued to struggle with weak traffic and declining sales, and added 28 more locations to its long list of store closings.

Sears reported that its second-quarter loss narrowed to $251 million, or $2.34 per share, in the quarter ended July 29, helped by cost savings resulting from the streamlining of operations and store closings.

Losses, adjusted for one-time gains and costs, came to $1.16 per share. Analysts had expected a loss of $2.48 per share.

Revenue fell 23% to a better-than-expected $4.37 billion in the period. Same-store sales were down 11.5%, worse than the expected 7.1% decline.

So far in fiscal 2017, Sears has shuttered approximately 180 stores (all were previously announced for closure), with an additional 150 stores (also previously announced) expected to go dark by the end of the third quarter. It is now adding 28 more locations — all Kmarts — to the list of stores that will close later this year.

"We are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our company to profitability," stated Edward S. Lampert, chairman and CEO of Sears Holdings. "The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance.

[See list of closings here.]

Sears said it expects the launch of its Kenmore brand products on Amazon.com will significantly expand the reach of the brand. It also expects the partnership will drive growth opportunities across its Sears Home Services and Innovel Solutions divisions, which will provide "white-glove service" for delivery, installation and extended product protection for the full range of home appliances from Kenmore sold on Amazon. 

The company also said it continues to explore opportunities for its Sears Home Services and Sears Auto Centers, as well as its Kenmore and DieHard brands. (On Tuesday, Sears signed new licensing agreements for Kenmore and DieHard brands that will greatly expand their distribution beyond Sears.)

“The decision to sell Kenmore appliances on Amazon is a smart move that will help expand the distribution of the brand," commented Neil Saunders, managing director of GlobalData Retail. “The problem is that both of these initiatives are tiny drops of positivity in a vast ocean of problems and, as such, are not going to save the company.” 

Sears said that it has used about $605 million of its $1.5 billion revolving credit facility due in 2020. Its cash balances were $442 million as of July 29.