Sears’ losses mount in Q2; accepts loan from Eddie Lampert
Sears Holdings Corp. swung to a loss amid declining sales in the second quarter, and chairman and CEO Eddie Lampert stepped in with more financing for his embattled company.
Sears said it had accepted a $300 million debt-financing offer from Lampert’s hedge fund, ESL Investments Inc. The loan is secured by a junior lien against Sears's inventory, receivables and other working capital.
Under the terms of the agreement, Sears can seek other investors to lend it as much as another $200 million on the same terms, Sears said. The financing is expected to close in seven to 10 business days.
Sears lost $395 million, or $3.70 per share, in the quarter ended July 30, compared with profit of $208 million, or $1.84 a share, in the year-ago period. (Last year’s results reflected the company's $2.7 billion spinoff of properties into a real estate investment trust.)
Net sales declined 8.8% to $5.66 billion.
Total same-store sales fell 5.2%. Same-store sales at Kmart were down 3.3%, the seventh straight quarterly decline. At Sears, same-store sales fell 7%, the eighth consecutive decline.
Gross margin fell to 22.2% in the quarter from 23.1% last year. Costs and expenses fell 3%.
"We continue to face a challenging competitive environment and while we continue to focus on our overall profitability, including managing expenses, we reported a net loss for the second quarter,” Lampert said in a statement. “We are encouraged by the year-over-year improvement in our Adjusted EBITDA and feel we are making progress in our transformation as we remain focused on our best stores, our best members and our best categories to drive our business and enhance the member experience."
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