Sears Suffers 3Q Loss, Warns of Store Closures
Hoffman Estates, Ill. Sears Holdings Corp. reported Tuesday that third-quarter results showed wider-than-expected losses, which the retailer said may lead to additional store closings.
Sears attributed the losses to a weak economy that negatively impacted sales at its U.S. Kmart and Sears, Roebuck divisions, and said it may close additional stores.
Sears lost $146 million during the three months ending Nov. 1. That compares with a profit of $4 million in the same period last year.
Revenue dropped more than 8% to $10.66 billion from $11.62 billion as the company’s Sears department store’s comparable sales slid 10.6% in the United States. Same-store sales at Kmart slipped 7%. Total same-store sales fell 9%.
Sears said it will take a pretax charge of $21 million in the fourth quarter related to the closing of eight underperforming stores. The company said it will continue to evaluate additional store closings or divestitures, remodels, acquisitions and stock and debt repurchases to boost its financial flexibility.
Meanwhile, Sears withdrew its forecast for earnings before interest, taxes, depreciation and amortization, citing the severe economic slowdown.
The company said sales declines were driven by housing related departments such as appliances, a pullback in consumer spending and a shift in its promotional strategy for certain goods.
Aside from closing underperforming stores, interim CEO and president W. Bruce Johnson said in a statement that Sears has prepared for a challenging holiday season by cutting inventory and reducing expenses. The company also began promoting layaway programs at Kmart and resurrected the program at Sears locations to provide consumers with another payment option.
“We believe we have positioned ourselves well for a difficult holiday shopping season,” Johnson said.
The company also said Tuesday that Scott Freidheim, formerly chief administrative officer at Lehman Brothers Holdings Inc., will be its new executive VP of operating and support businesses. Former Banana Republic executive Nick Coe has been appointed president of Lands’ End.
Cyber Monday savings extended at Walmart.com
BRISBANE, Calif. Walmart.com announced that it will extend its “Cyber Monday” savings through Dec. 1. The retailer is offering up to 30% savings on top brands like Samsung, Garmin, Nintendo Wii and Fisher-Price.
“It’s important to help our customers get the most out of their Christmas budgets this year, and we’re doing just that with up to 30 percent savings on more than 150 Cyber Week online specials,” said Raul Vazquez, Walmart.com ceo. “Once again, we’re helping customers save even more by extending these online specials all week long and making many available for free shipping with Site to Store and 97-cent shipping to home.”
November comps may decline double digits
It should come as a surprise to no one that the monthly sales figures Target is set to release this Thursday are not expected to be good. The company said in early November it expected same-store sales to decline between 6% and 9%, after a decline of 4.8% in October. The company also appeared to lower expectations further on Nov. 17, when it released third-quarter financial results and cfo Doug Scovanner commented that sales were trending lower than that company had expected. Now, some analysts are forecasting that Target could actually see same-store sales dip into negative double digits.
Target won’t be alone when it reports weak November sales, but the headline number will appear much worse than it actually is due to this year’s late Thanksgiving holiday and a shift in the retail reporting calendar.
This year, Thanksgiving fell on fell on Nov. 27 and Target’s four week reporting period ended on Nov. 29, so the company missed out on holiday sales that would normally be included in its results when Thanksgiving falls earlier in the month. That was the case last year when Thanksgiving fell on Nov. 22 and the reporting period ended on Nov. 30. As a result, the company benefitted from sales that took place over the Thanksgiving weekend and holiday shopping that took place the following week that was reflected in November results. Target’s November results this year, while not expected to be good, will appear even worse since post-Thanksgiving holiday sales will be reflect in December results.
Although the monthly results will attract a lot of interest from the media this year, nuances of the retail reporting calendar tend to get lost in the shuffle and month-to-month shifts matter little since they even out over the course of a quarter. However, given all of the turmoil taking place in the economy and dire predictions of weak holiday sales, a lack of understanding of the quirky retail reporting calendar will lead to sales results that appear artificially weak.