Sears Loss Rises in Q3
HOFFMAN ESTATES, Ill.-Reduced sales and an income-tax provision sent Sears Holdings deeper into the red in its fiscal third quarter, which ended on Oct. 27.
The corporation posted a net loss of $498 million, compared with a third-quarter net loss of $421 million last year. Sears was charged $11 million in income taxes in the quarter due to establishment of a valuation allowance against certain deferred income-tax assets last year, as opposed to an income-tax benefit of $91 million in last year's third quarter.
Net sales fell 5.8 percent to $8.9 billion, including drops of 1.6 percent in Sears U.S. same-store sales and 4.8 percent in same-store sales at Kmart's U.S. stores. The falloff in checkouts was due in part to having fewer full-line Sears and Kmart stores in operation in this year's third quarter. In a conference call to financial analysts yesterday, Lou D'Ambrosio, Sears Holdings' president and CEO, said the quarter brought same-store declines in home, consumer electronics and grocery, offset in part by comparable-store gains in apparel and appliances.
Although Sears Holdings was able to trim costs in the quarter, gross margin declined and selling and administrative expenses rose as a percentage of sales. Gross margin percentage slipped 10 basis points to 25.4 percent. SG&A in dollars fell 5.3 percent but gained 20 basis points as a percentage of sales, to 28.2 percent.
In yesterday's conference call, D'Ambrosio said Sears Holdings is continuing its transformation to what he described as a "member-based business model." He said the company has invested several hundred million dollars in 2012 in integrated retail and its Shop Your Way membership program. "More than half of our revenues at Sears and Kmart now come from Shop Your Way members," he said of the program, which offers personalized deals, guaranteed pickup of merchandise in five minutes, no receipt required for refunds or exchanges and a social shopping experience on the website shopyourway.com.
Regarding the investment in integrated retail, D'Ambrosio said Sears Holdings' online business increased by more than 20 percent in the third quarter. "What's interesting is that the most significant part of this growth came from multichannel transactions like buy online, pick up in store or order in-store for home delivery," he said. "And about half of the online business now includes interactions with another channel."