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Sears Sales Dive in Q2

Same-store sales off 14 percent at Sears stores and 7.3 percent at Kmart
Posted on August 20, 2015 by David Gill

Sears HoldingsHOFFMAN ESTATES, Ill.-Steep declines in same-store sales led Sears Holdings to a drop of 22.5 percent in second-quarter net sales, which totaled $6.2 billion.

Same-store sales at Sears stores were down 14 percent, while comparable-store sales at Kmart fell 7.3 percent. The Sears stores results included a dropoff in same-store sales of home appliances, offset by a gain in sales of mattresses. At Kmart, same-store sales of home appliances picked up in the quarter, along with toys, but these increases were offset by declines in consumer electronics, grocery and household, apparel and drugstores.

In the quarter, which ended on Aug. 1, Sears Holdings did post net income of $208 million, compared to a net loss of $573 million in last year’s second quarter. The bottom line included what the company called “significant items,” among which were the $2.7 billion in proceeds from the sale-leaseback of certain stores to Seritage Growth Properties, the real estate investment trust. Without these items, Sears Holdings would have reported a loss of $256 million in the quarter.

In a prerecorded conference call this morning, Rob Schriesheim, Sears Holdings chief financial officer, said the comp-sales declines resulted in part due to “deliberate actions” with its promotional and marketing spending. “As expected,” Schriesheim said, “the result of these actions was that, in many categories, we saw an increase in profitability despite experiencing comparable-store sales declines.”

Gross margin was up 140 basis points to 23.1 percent. Selling and administrative expenses fell 20 percent in dollars but rose 90 basis points as a percentage of sales, to 27.3 percent.

Schriesheim also said Sears Holdings continues to progress with its transformation to a model centered on its Shop Your Way members, integrating the company’s store base with its e-commerce functions. He said more than 70 percent of the company’s sales come from Shop Your Members. “We are applying our resources toward better understanding the wants and needs of our ‘best members’ so that we can apply these insights towards increasing engagement and strengthening our relationships with all of our members,” he said.