Sears cites ‘progress’ as it swings to Q4 profit, trims debt
Sears Holdings reported a profit for its fourth quarter, helped by a gain from the new tax bill, and a smaller-than-expected decrease in same-store sales. But its revenues continued to decline.
The struggling retailer also announced it has closed on a secured loan of $440 million to use toward a $407 million payment on its pension plans. The loan is secured by properties that were previously subject to a ring-fence arrangement with the Pension Benefit Guaranty Corporation. The properties have an appraised value of nearly $980 million.
Sears’ net income totaled $182 million, or $1.69 per share, for the quarter ended Feb. 3, which had an extra week of revenue, compared with a loss of $607 million, or $5.67 a share, in the year-ago period. The latest quarter's results included a $470 million gain due to new U.S. tax legislation, and also a non-cash accounting charge of $72 million related to the impairment of the Sears trade name.
Revenue fell nearly 27.7% to a better-than-expected $4.38 billion. Sears attributed half the decline to a reduction in its store count. The retailer operated a total of 1,002 stores at the end of fiscal 2017, compared with 1,430 a year ago. It previously announced plans to close more than 100 stores by April.
Total same-store sales fell 15.6%, less than expected. Same-store sales decreased 12.2% at Kmart and 18.1% at Sears. Adjusted EBITDA was $2 million in quarter of 2017, compared to $(61) compared to $(61) million in the prior year.
Commenting on the results, Sears chairman and CEO Edward S. Lampert said the chain made progress in 2017, with a return to positive adjusted EBITDA and another quarter of year-over-year improvement in our financial results. He also noted that Sears entered important partnerships, including its agreement to sell Kenmore appliances and related services through Amazon, to broaden the reach of its brands.
"We also recognize that we need to do more if we are to deliver on our commitment to return to profitability in 2018,” he said. “We will work to build on the progress we made in 2017, including ongoing actions to improve or close unprofitable stores and to unlock the value in our assets. Importantly, to ensure our long-term viability, we must substantially improve our sales and gross margin performance, including adjustments to our business model.”
For fiscal 2018, CFO Rob Riecker said Sears is planning for annual cost reductions of $200 million, which aren't related to store closures. Sears has trimmed its long-term debt to $3.2 billion from $4.2 billion a year ago.
"In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, we are taking incremental actions to further streamline our operations to drive profitability," Riecker stated.
The company had $182 million in cash and equivalents at the end of the fourth quarter, down from $286 million one year earlier. Sears has used roughly $648 million of its $1.5 billion revolving credit facility due in 2020.
The struggling retailer also announced it has closed on a secured loan of $440 million to use toward a $407 million payment on its pension plans. The loan is secured by properties that were previously subject to a ring-fence arrangement with the Pension Benefit Guaranty Corporation. The properties have an appraised value of nearly $980 million.
Sears’ net income totaled $182 million, or $1.69 per share, for the quarter ended Feb. 3, which had an extra week of revenue, compared with a loss of $607 million, or $5.67 a share, in the year-ago period. The latest quarter's results included a $470 million gain due to new U.S. tax legislation, and also a non-cash accounting charge of $72 million related to the impairment of the Sears trade name.
Revenue fell nearly 27.7% to a better-than-expected $4.38 billion. Sears attributed half the decline to a reduction in its store count. The retailer operated a total of 1,002 stores at the end of fiscal 2017, compared with 1,430 a year ago. It previously announced plans to close more than 100 stores by April.
Total same-store sales fell 15.6%, less than expected. Same-store sales decreased 12.2% at Kmart and 18.1% at Sears. Adjusted EBITDA was $2 million in quarter of 2017, compared to $(61) compared to $(61) million in the prior year.
Commenting on the results, Sears chairman and CEO Edward S. Lampert said the chain made progress in 2017, with a return to positive adjusted EBITDA and another quarter of year-over-year improvement in our financial results. He also noted that Sears entered important partnerships, including its agreement to sell Kenmore appliances and related services through Amazon, to broaden the reach of its brands.
"We also recognize that we need to do more if we are to deliver on our commitment to return to profitability in 2018,” he said. “We will work to build on the progress we made in 2017, including ongoing actions to improve or close unprofitable stores and to unlock the value in our assets. Importantly, to ensure our long-term viability, we must substantially improve our sales and gross margin performance, including adjustments to our business model.”
For fiscal 2018, CFO Rob Riecker said Sears is planning for annual cost reductions of $200 million, which aren't related to store closures. Sears has trimmed its long-term debt to $3.2 billion from $4.2 billion a year ago.
"In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, we are taking incremental actions to further streamline our operations to drive profitability," Riecker stated.
The company had $182 million in cash and equivalents at the end of the fourth quarter, down from $286 million one year earlier. Sears has used roughly $648 million of its $1.5 billion revolving credit facility due in 2020.