FINANCE

Sears Q2 loss widens; hints at more store closings

BY Marianne Wilson

Sears Holdings Corp.’s revenue dropped 25% in the second quarter as the chain continues to shrink its footprint.

Sears said it lost $508 million, or $4.68 a share, in the quarter ended Aug.4, compared with a loss of $250 million, or $2.33 a share, in year-ago period.

Sales fell to $3.18 billion from $4.27 billion last year amid store closures. Same-store sales decreased 3.9%, the smallest decline in over three years. By banner, same-store sales fell 3.7% at Kmart and 4% at Sears.

In a statement, Sears chairman and CEO Edward Lampert said he encouraged by the quarter’s improved comparable stores sales trend and the positive comparable store sales of 3.0% and 2.5% achieved in the months of July and August, But he noted that the company has not met its goal of returning to profitability, and hinted that more store closings may be in the offing. (In August, Sears announced it was closing another 40 stores.)

“We continue to close unprofitable stores, and we are hopeful that we can stabilize our store base at a meaningful level in the near future,” he said. “Our goal is to right-size our store footprint to a solid base from which we can operate and grow profitably, while leveraging our online and Shop Your Way platforms.”

Lampert gave an update on Sears in a blog post on the chain’s website in which he discussed the chain’s precarious financial condition.

“We have worked hard to make the best possible decisions for the company given the options available to it and the variety of constraints it has faced,” Lampert wrote. “We continue to believe that Sears can successfully evolve into a smaller but profitable company. … This can only happen with the cooperation of our various stakeholders and with the monetization of further assets that can be reinvigorated independently and without the financial constraints of Sears Holdings.”

He also noted the critical role ESL — the hedge fund controlled by Lampert — has played in the company.

“To date, ESL has been willing to provide financing on terms that were at least as favorable as might be achievable in the market and, when practical, was on a basis that allowed other investors to participate on the same terms,” he wrote. “This funding has given the company time it would not otherwise have had to adjust its operations, attempt to return to profitability, and maximize its asset values. … We continue to believe that it is in the best interests of all our stakeholders to accomplish this as a going concern, rather than alternatives that could result in significant reductions in value.”

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FINANCE

These retailers are the biggest winners with exit of Toys ‘R’ Us

BY CSA Staff

With the holiday shopping season looming, retailers are jumping in to fill the void left by the demise of Toys “R” Us — but two rivals are the clear winners.

Walmart and Target appear to be the biggest winners to date, according to a study by Gordon Haskett Research Advisors in partnership with data provider Alpha Hat, CNBC reported.

Walmart has captured 26% of lost Toys “R” Us traffic, Target got 14%, Dollar General and Dollar Tree each captured 10%, and Costco got 8%, the report said, citing a research note by Gordon Haskett.

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Kroger
FINANCE

Kroger Q2 mixed as profit tops Street, but sales come up short

BY Marianne Wilson

Kroger Co.’s second quarter profit topped estimates, but its sales came in below estimates amid ongoing intense competition in the grocery sector.

Net income rose 43.9% to $508 million, or 62 cents a share, from $353 million, or 39 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came in at 41 cents, above estimates of 38 cents.

Sales increased to $27.87 billion from $27.60 billion, below estimates of $27.93 billion. Same-store sales rose 1.6%, below expectations.

On its quarterly earnings call, Kroger management said that its ongoing efforts to adjust store layouts and rearrange brands on the shelves, with an emphasis on its own labels, impacted same-store sales.

“This effect is not a surprise to us,” said CEO Rod McMullen on the call. “We expect the headwinds from space optimization during the first half of 2018 to become a tailwind late in the third quarter.”

Looking ahead, the company raised its net EPS guidance range to $3.88 to $4.03 from $3.64 to $3.79, but affirmed its adjusted EPS outlook of $2.00 to $2.15.

Kroger has been investing in a slew of initiatives to grow its online business as it faces fierce competition in the space from Amazon and Walmart.

“We are only two quarters into our three-year Restock Kroger plan, and we are making solid progress,” McMullen stated in a release. “Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba’s Tmall.”

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