More retail space changes are coming for Sears Holdings Corp., which reported a net loss $573 million for the second quarter of 2014 compared to a $194 million loss for the same period a year ago.
“Our second quarter earnings are unacceptable and we are taking steps to address our performance on several levels. This includes reducing costs as we evolve our business model, investing in our Shop Your Way and Integrated Retail customer initiatives, rationalizing our physical footprint and improving pricing and promotions,” said Edward S. Lampert, Sears Holdings’ chairman and CEO.
“There is more work to be done to get results where we expect them to be,” Lampert added. “Like any transformation, we must first overcome the burden of the initial costs before we can enjoy the benefits. We have a large and valuable portfolio of assets that provide us with the flexibility we need to fund our transformation as we proactively work to return Sears Holdings to profitable growth and deliver shareholder value.”
Revenues decreased $858 million to $8 billion for the quarter. The revenue decrease included the separation of the Lands’ End business, which was completed in the first quarter of 2014 and accounted for $330 million of the decline.
The revenue decrease also included the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for $256 million of the decline, as well as a decrease of $140 million at Sears Canada. Revenues for the quarter also declined as a result of lower domestic comparable store sales, which accounted for $47 million of the decline.
Store Closing May Accelerate
Rob Schriesheim, Sears Holdings’ CFO, said, the company is continuing to reduce unprofitable stores as leases expire and “in some cases will accelerate closings when it is economically prudent.”
In the past three years, Sears has decreased its lease obligations by $1 billion.
“We have announced that we expect to close about 130 stores in 2014, which includes a combination of leased and owned locations. We have closed about 95 to date,” Schriesheim said. “To put this into perspective, following these closures, we will still have about 1,900 Sears and Kmart big box stores in operation, representing about 200 million square feet throughout the United States to serve our members. Few companies have this scale and reach.”
“I would also point out, that while we are adjusting our store base, we continue to operate stores in some of the best malls in America,” he said. ”Two reports have been done over the past six years, one by Goldman Sachs listing the top 100 malls in America, and the other by Morgan Stanley listing the top 100 fashion malls in America. Combining the two lists, in 2007, we were in 63 of the malls and we are now in 61. We are retaining stores in some of the best locations even as we close stores to optimize our store footprint and reduce lease obligations.”
Schriesheim added the Chicago-area based retailer is also continuing to evaluate strategic alternatives for our Sears Auto Center business.
“We have had discussions with third parties regarding a variety of opportunities, including partnerships,” he said.