FINANCE

Sears’ holiday sales plunge; lines up new financing, cost-cutting measures

BY Marianne Wilson

Sears Holdings had a miserable holiday season.

The beleaguered retailer reported that its overall same-store sales fell 16% to 17% for the first two months of the fourth quarter. Sears results came as the majority of retailers were reporting strong holiday results and as overall holiday sales rose 4.9%, the biggest increase since 2011.

Sears also announced that it has raised $100 million in new financing and is seeking to borrow an additional $200 million from other parties. The chain said it has also amended terms on its existing second lien notes and is in talks with other lenders to improve the terms on up to $1 billion of non-first lien debt.

“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility,” stated CFO Rob Riecker said in a statement. “The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business.”

In addition, Sears plans to streamline its operations to achieve another $200 million in cost reductions on an annualized basis in 2018 (excluding store closures.) Last week, Sears announced yet another round of store closures, with 103 locations to be shuttered by spring.

In a blog post, Sears chairman and CEO Eddie Lampert continued to maintain that the company is on track to turn a profit in 2018. But he also warned that, if the refinancing is not “fully successful,” the Sears’ board will “consider all other options to maximize the value of Sears Holdings’ assets.”

There was one positive note in Sears’ most recent announcement. The retailer expects a smaller loss for the fourth quarter compared to last year. The company expects a loss of between $200 million and $320 million, excluding charges from closing stores, severance and tax-related matters, compared with a net loss of $607 million during the year-ago period.

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Nordstrom raises outlook on solid holiday

BY Marianne Wilson

The ranks of retailers reporting a good holiday season continues to expand.

Nordstrom’s net sales rose 2.5% for the nine weeks ended December 30, 2017. Same-store sales increased 1.2%. The company said the results reflected an improvement in Nordstrom full-line and Nordstrom Rack stores relative to year-to-date sales trends and continued growth in e-commerce.

In the Nordstrom brand (includes U.S. and Canada full-line stores and Nordstrom.com) net sales when combined with Trunk Club increased 0.7% and comparable sales inched up 1%. In the Nordstrom Rack brand (includes Nordstrom Rack stores and Nordstromrack.com/HauteLook) net sales increased 8.2% and comparable sales rose 2.9%.

Based on holiday results, the retailer updated its fiscal 2017 expectations for an increase in net sales of approximately 4.2%, inclusive of the 53rd week, and an increase in comparable sales of approximately 0.5%.

Nordstrom expects full-year earnings per diluted share to be in a range of $2.90 to $2.95, compared with its prior outlook of $2.85 to $2.95. This reflects sales performance near the high end of the company’s outlook range, continued stability in merchandise margins and expected deleverage from higher supply chain, technology, and occupancy expenses associated with Nordstrom’s growth initiatives.

Similar to other retailers, Nordstrom’s updated outlook does not incorporate the potential impact of federal tax reform.

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First Data: Electronics/appliances among holiday standouts

BY Marianne Wilson

Nearly all retail categories enjoyed solid growth this past holiday season, but some were particularly robust.

Electronics/appliances and building materials helped drive the overall seasonal growth, seeing the highest growth rates at 8.3% and 6.9%, respectively, according to First Data’s Holiday 2017 SpendTrend report. The only category with a slight decline was the sporting goods, hobby and books segment, with a 0.6% decline. (The data in the report includes only card-based forms of payment.)

Every single region of the country experienced growth in holiday spending, but the Southwest and New England regions grew the fastest, at 5.7% and 5.5%, respectively. At the other end of the scale was the Mid-Atlantic which posted growth of 0.7%.

Among the 10 largest U.S. cities, Houston ranked number one in terms of overall growth, with a 10.9% increase in spend. Following the devastating hurricane season, spending patterns indicate that people in the area are rebuilding. Building materials sales growth was up 31% and furniture sales jumped 22%.

The average ticket size for retail brick-and-mortar was $68.57, compared to $103.49 for e-commerce. The dip in the average e-commerce ticket size, which was $105.73 in 2016, along with nearly 13% growth in transaction volume suggests that more people are using online channels to purchase less expensive, everyday items than in prior years, according to the report.

Throughout the holiday season, retail spending was up 5.4%, a solid increase from last year’s growth rate of 3.6%. E-commerce accounted for 29% of all transactions, up from 26% in 2016.

For more information on the First Data report, including average ticket size, spending across various retail categories, and a deeper regional analysis, go to the firm’s website.

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