Sears posts first quarterly profit in nearly two years on cost cuts

Meanwhile Sears shares surged 16% after the company reported its first quarterly profit for almost two years.

Net income attributable to Sears' shareholders was US$244 million, or US$2.28 per share, compared with a loss of US$471 million, or US$4.41 per share, a year earlier. The gain reflects efforts by Chief Executive Officer Eddie Lampert to get Sears's financial house in order. The Company is the parent company of Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co (Sears).

Investors took the results as a sign that Lampert's turnaround bid is making some headway.

"While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing". Another trade for 222,100 shares valued at $1.95M was made by FAIRHOLME CAPITAL MANAGEMENT LLC on Wednesday, March 15. Moreover, Tfs Capital Llc has 0.04% invested in the company for 40,645 shares.

Many retailers have posted declining sales for their most recent quarters but the declines at Sears are much deeper that at J.C. Penney or Macy's.

The closings, which number 347 since a year ago, cost the company $557 million in lost revenue, for a total take of $4.3 billion for the three months, ended April 29. The company reported ($2.15) earnings per share (EPS) for the quarter, missing the Thomson Reuters' consensus estimate of ($0.72) by $1.43.

Revenue in the first quarter fell to $4.3 billion, with the decline driven by having fewer Kmart and Sears full-line stores. These so-called comp sales are a closely watched measure because they exclude stores that opened or closed in the previous year.

"Sears continues to be less relevant with potential customers, vendors and landlords", McGinley said. He pointed to the nearly $900 million in cash used for operating activities in the quarter, more than in the year-ago period.

The first-quarter net income was the first profit since the second quarter of 2015, when the creation of a real estate investment trust generated about $2.7 billion for Sears. Other achievements included extensions on more than $1 billion in debt and pension obligations, and new incentives for its Shop Your Way VIP loyalty program that resulted in more than a 50-percent increase in membership year over year. Over the years, he's sold or spun off assets to raise cash, including its Craftsman tool brand and Lands' End clothing business. Also, CEO Edward S. Lampert bought 525,936 shares of the business's stock in a transaction on Friday, March 24th. Broken out by chain, Kmart's comps decreased 11.2 percent, while comps at Sears' namesake flagship stores fell 12.4 percent on weakness in its core appliance, apparel and lawn-and-garden categories.

Nevertheless, taking away the impact from certain one-off items, Sears posted a $230 million adjusted loss during the quarter that ended on April 29.

Sears CFO Rob Riecker has said that the retailer is looking into more ways of improving liquidity and hinted there could be a possibility of more stores being shuttered.

  • Zachary Reyes