Sears Goes from Loss to Income in First Quarter; to Spin Off Part of Sears Canada
HOFFMAN ESTATES, Ill.-Sears Holdings' bottom line transformed from red to black in its fiscal first quarter, as the retail holding company turned in net income of $189 million compared to a net loss of $170 million in last year's first quarter.
In a separate statement, Sears Holdings also said it would spin off part of its holdings in Sears Canada. The move, which is expected to be completed within the 2012 calendar year, would reduced Sears Holdings' stake from 95 percent of Sears Canada's outstanding shares to 51 percent.
Expense controls and gains on sales of assets helped Sears to a positive bottom line in the first quarter, which ended on April 28. Although selling, general and administrative expenses increased 10 basis points as a percentage of sales to 26.4 percent, they fell 2.5 percent in dollars. Gross margin ticked up 100 basis points to 27.7 percent.
Lou D'Ambrosio, Sears Holdings' CEO, said the first-quarter results reflected the company's focus on three core priorities: enhancing financial and operational discipline; improving the core retail operations; and "leading customer innovation through integrated retail and an engaging membership program, Shop Your Way rewards."
Net sales for the company as a whole slipped 2.8 percent to $9.3 billion, partly due to the fewer Sears and Kmart stores that were in operation in this year's first quarter. Consolidated domestic same-store sales were off 1.3 percent, comprised of a 1 percent decline in Sears stores and a decrease of 1.6 percent at Kmart.
Regarding the Sears Canada spinoff, Sears Holdings said it would permit both the parent company and Sears Canada to focus on their respective businesses and "allocate resources to best optimize returns on assets employed." It would also provide investors the opportunity to invest in two separate public companies and potentially enhance the liquidity for holders of Sears Canada's common shares.