Sears may sell off 140 more stores to fund pensions
With its revenue continuing to slide, beleaguered Sears Holdings Corp. has entered into a deal that will allow for another round of store closures.
The retailer on Wednesday pre-announced its third-quarter earnings, reporting a 15.3% drop in same-store sales, one of its biggest declines in recent quarters. It also said it has struck an agreement with the Pension Benefit Guaranty Corp. that would allow for the potential sale of 140 Sears properties in exchange for $407 million of contributions to its underfunded pension plan. (The PBGC is a government oversight organization that guarantees individuals’ pensions and acts as a backstop if a company goes bankrupt. It can require that a company put up collateral against underfunded pension plans.)
The agreement provides the company with financial flexibility through the ability to monetize properties, and, in addition, provides funding relief from contributions to the pension plans for the next two years, according to Sears.
“This agreement with the PBGC is another positive step forward which, upon closing, will provide our company with financial flexibility while supporting our commitment to honor our obligations to the associates and retirees covered by the pension plans,” stated Edward S. Lampert, Sears chairman and CEO.
Since the 2005 merger of Sears and Kmart, Sears said it has contributed approximately $4.5 billion to the pension plans, to cover what was initially a $1.8 billion deficit.
Sears said it is working to ensure its associates and retirees receive their full pension benefits in either a lump sum or annuity form. It said the number of participants in its pension plans has been reduced from roughly 400,000 to 100,000.
Sears reported total sales of approximately $3.7 billion for the third quarter, down from $5 billion a year ago. Store closures contributed to over half the declines, the company said. (Sears currently has more than 400 stores in operation compared to this time last year. Last week, the retailer announced plans to close 63 more locations, mostly Kmarts, after the holidays.)
Sales were also impacted by a decline in the number of pharmacies open in Kmart stores, and a reduction in consumer electronics in Sears and Kmart stores. Same-store sales fell 13% at Kmart and 17% at Sears
Sears expects a third-quarter net of between $525 million and $595 million, down from a net loss of $748 million loss in the year-ago period.
“Over the past several months, the company continued to focus on streamlining its operations, reducing inventory and operating expenses, and taking actions to further improve performance,” Sears stated. But it warned “the retail environment remains challenging, with continued pressures on sales.”
Sears said it expects to reach positive adjusted earnings before interest, taxes, depreciation and amortization next year.
The Container Store tops estimates; raises fiscal outlook
Despite store closures amid a damaging hurricane season, The Container Store topped analysts’ estimates for its second quarter.
For the second quarter ended September 30, the retailer reported that net sales rose 6.5% to a better-than-expected $218.4 million. Net sales in company’s retail business rose 7% to $202.3 million. This included an estimated $1.4 million in lost sales associated with Hurricanes Harvey and Irma.
Same-store sales rose 1.9% — including the negative impact of the hurricanes. The company estimates that the comparable store sales headwind from the combined impact of Hurricane Harvey in Texas and Hurricane Irma in Florida was approximately 70 basis points.
The retailer reported a net loss of $0.9 million, compared to net income of $3.5 million in the year-ago period. Adjusted for one-time items, the company earned 12 cents a share, compared with 8 cents a year ago. Analysts had expected adjusted earnings of 6 cents a share.
“We are happy to deliver fiscal second quarter results that are ahead of our expectations on both the top and the bottom line, despite hurricane-related headwinds in our Texas and Florida markets, where we experienced temporary store closings in approximately 12% of our store base during the quarter,” said chief executive Melissa Reiff. “The improvement in our business was broad-based across product categories, and reflects the traction of our sales revitalization initiatives which, in combination with our efficiency and optimization efforts, is already driving an encouraging improvement in profitability as illustrated by the 50% increase in our Adjusted EPS in the second quarter.”
Reiff also credits the gains to initiatives across merchandising, marketing, store operations, customer experience and optimization efforts. Its optimization initiative, which was announced in May, is a four-part plan designed to drive improved sales and profitability.
All of these efforts prompted the retailer to raise its 2017 full year outlook across net sales, comparable store sales, and adjusted net income per common share.
“With the first half of the year behind us, we are raising our full year outlook and remain focused on building on our progress and driving the sales and profitability improvements we know this business is capable of,” added Reiff.
Teen apparel retailer files for bankruptcy protection
Styles For Less is the latest retailer to file for Chapter 11.
Burdened by declining sales, the teen fashion retailer filed in the U.S. Bankruptcy Court, Central District of California on Monday. The company plans to reorganize its debt during the bankruptcy, and is seeking a loan to fund itself through the process, according to Reuters.
The retailer based in Anaheim, California, listed assets and liabilities between $10 million and $50 million. Wholesale suppliers such as Vivace and Ambiance, were listed among its biggest creditors, the report said.
The retailer, which sells women’s clothes and accessories, operates 93 stores and an e-commerce site, according to the company’s website.
Styles For Less is the latest retailer to file for Chapter 11 — a group that has already exceeded 2016’s total of nine bankruptcies. Consulting firm AlixPartners said in the report.
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