Sears Holdings gives update on restructuring, real estate and finances
Things aren’t getting any better at Sears Holdings, at least not sales wise — and more store closings are in the works.
The struggling chain on Friday provided an update on its restructuring program, which now includes plans to close 50 Auto Centers, increased its cost-saving target, and also gave a first quarter update. Since the beginning of the fiscal year, same-store sales at Sears and Kmart declined 11.9% on a combined basis, 10.8% when excluding consumer electronics, compared to the year-ago period.
“The retail environment remained challenging with continued softness in store traffic and elevated price competition,” said Edward S. Lampert, chairman and CEO of Sears Holdings. “Despite the softness in our retail channels, our home services business continued to perform well and we believe it is positioned for continued growth for the balance of the year.”
Lampert added that as a result of the sales of its Craftsman brand and the sale of certain real estate properties, the company expects to report positive net income for the first quarter of 2017.
Sears said it expects to reduce costs by $1.25 billion for the year, up from a previously announced $1 billion. The retailer said it has already delivered on $700 million in cost savings to date. The initiatives being taken to realize $1.25 billion in annualized cost savings in 2017 include the previously announced closing of 108 Kmart and 42 Sears stores. New actions include the closing of 92 underperforming pharmacy operations in certain Kmart stores and 50 Sears Auto Center locations.
“Earlier this year, we initiated a strategic restructuring program and committed to improving our operating performance and financial flexibility in a very challenging retail environment," Lampert said. "While we have made significant progress in reducing our cost base and enhancing our member value proposition, we need to take further action. Accordingly, we will increase our structural cost savings target by $250 million on an annualized basis and accelerate our efforts to maximize value from our real estate portfolio, which we believe will improve our financial flexibility as we pursue our strategic transformation."
Lampert added that Sears will to take all necessary actions to improve its performance and will leverage its lease optionality to reconfigure its stores and reduce capital obligations.
Sears has established a special committee of independent directors to market certain real estate properties. The committee has retained Eastdil Secured, Centerview Partners, and Weil, Gotshal & Manges LLP as its advisors. As of Friday, April 21, the committee has received non-overlapping bids in excess of $700 million on over 60 separate real estate properties.
Mixed results for value retailer in Q4
99 Cents Only Stores turned in a strong sales performance for its fourth quarter, even as its net loss grew amid rising expenses.
The retailer reported a net loss of $20.9 million for the quarter, versus a net loss of $18.4 million in the year ago period.
Net sales increased 6.7% to $552.5 million, while same-store sales rose 6.4%. Average ticket gained 4.4% and customer traffic increased 1.9%. Operating loss was $6.5 million versus $2.7 million in the period a year prior.
Seasonal merchandise and general merchandise helped drive comps in the quarter, the company said, while fresh offerings improved due to better product availability, improved in-stock levels and the expansion of the company’s third party distributor partnership.
For the full-year fiscal 2017, 99 Centers Only Loss narrowed its loss to $118.2 million from a net loss of $248 million last year. Net sales rose 2.9% to $2.06 billion. For the full year, adjusted EBITDA of $50.6 million was up 28%, compared to the prior year, reversing a two-year decline in the same.
“We concluded fiscal 2017 with a strong fourth quarter driven by growth in same store sales, expanding margins and lower inventory levels,” said Geoffrey Covert, president and CEO, 99 Cents Stores, which operated 390 stores at the end of the quarter. “As a result, we continued to solidify 99 Cents Only Stores’ liquidity position while generating significant year-over-year growth in adjusted EBITDA. In addition, fourth quarter gross margin of 30.1% improved 340 basis points year-over-year, primarily due to our concerted efforts to improve shrink and scrap and execution in our logistics network.”
Camper, Westfield, World Trade Center, New York City
Camper, the contemporary footwear brand based in Spain, stays true to its tradition of creating unique store experiences for shoppers at each of its locations and at its new outpost in Manhattan.
The 650-sq.-ft. store has a minimalist look, and features hardwood oak plank flooring with a satin finish. Oversized photo images provide a bold backdrop for product displays. The lighting is ambient and subdued in order to focus shoppers’ attention on the displays.
“Camper introduces different store concepts in order to create unique experiences for shoppers at each of its locations. The World Trade Center store’s design is based on the idea of diorama-like exhibits, in which shoes serve as the focal artifacts,” said Steven Andersen, principal, Montroy Andersen DeMarco (MADGI), New York City, which collaborated on the project with Studio Camper, the brand’s in-house store design team.
Seven-ft.-high “diorama” merchandise display cabinets are installed along three perimeter walls of the space. The cabinets consist of boxes of varying dimensions, designed to showcase either individual pairs of shoes or small collections. The boxes feature LED strips and replaceable photo backgrounds that reflect changing seasons and inspirations for each shoe design.
MADGI’s other recent and current retail projects include three U.S. Polo Assn. stores in New York City; six Zara stores throughout the U.S.; and the Discovery TSX retail/entertainment in Times Square.
Camper has more than 300 stores around the word, and also sells its product through 4,000 authorized doors in some 50 countries.