Sears Holdings' Loss Grows in Q2
HOFFMAN ESTATES, Ill.-In a second quarter in which the company's revenues and gross margin continued to slide, Sears Holdings reported a net loss of $194 million, compared to its net loss of $132 million in last year's second quarter.
Total sales and merchandise services in the quarter, which ended on Aug. 3, were $8.9 billion, down 6.3 percent from a year ago. A Sears Holdings statement attributed the revenue shortfall to having fewer Kmart and Sears full-line stores in this year's quarter, along with the separation of Sears Hometown and Outlet Stores, which was finalized last November.
At Kmart, same-store sales in the second quarter dropped 2.1 percent, reflecting declines in sales of grocery, household, pharmacy, consumer electronics and toys. Sears' domestic same-store sales were off 0.8 percent, brought about by a decrease in sales of home appliances, offset in part by increases in home, lawn and garden, and apparel. For the corporation as a whole, same-store sales fell 1.5 percent.
Gross margin dropped 210 basis points to 24.6 percent, due to the sales declines and expenses related to store closings. Selling, general and administrative expenses dropped 6 percent in dollars but were up 10 basis points as a percentage of sales, to 25.8 percent.
Edward Lampert, Sears Holdings' chairman and CEO, said the second quarter saw "meaningful progress ... in our transformation to a member-centric company." Lampert said members of Shop Your Way, the company's rewards program for shoppers, accounted for 65 percent of the company's sales.
"While the increase in Shop Your Way promotional activity and member redemptions resulted in a meaningful increase in our costs, it demonstrates that our members are deepening their engagement with our program, which will allow us to further accelerate our transformation," he said. At the same time, he stressed the importance of returning Sears Holdings to profitability "and I am disappointed that we did not deliver a better result."