Sears Holdings missed the memo on the recent retail rally, posting Q2 same-store sales declines of 3.3% at Kmart stores and 7% at Sears stores. Revenue fell 8.8% to $5.66 billion in what CEO Edward Lampert called “a challenging competitive environment.”
The company said it will receive $300 million of additional debt financing secured by a junior lien against inventory, receivables and other working capital, from Lampert’s ESL Investments, Inc. hedge fund.
Sears also said it has had interest in its Sears Home Services business and its Kenmore appliance, Craftsman tools, and DieHard vehicle battery brands from retailers, manufacturers, and investors. The company said earlier this year that it may spin off some of those still-valuable business units.
Sears increasingly looks like a retailer in its final throes as sales continue to slide and losses continue to mount. While some retailers, like J.C. Penney, have rallied in the last few months to show optimistic earnings, others are facing “a challenging competitive environment." And Sears isn't alone in navigating a rocky path forward.
Sears Holdings CFO Rob Schriesheim remained positive when results were released on Thursday, alluding to the retailer's ability to shore itself up via its newly created REIT and its CEO’s hedge fund. "During the first half of 2016, we have demonstrated our ability to finance our transformation strategy with the levers available to us through our portfolio of assets and businesses,” Schriesheim said in a statement.
In the second quarter, the company’s loss rose to $395 million, or $3.70 per share, compared with its profit of $208 million, or $1.84 per share, year over year. Adjusting earnings losses were a $2.03 per share from $2.40 per share in Q2 last year.
The results spell trouble for the retailer as the holidays close in, warns Brian Sozzi at TheStreet. "I suspect the quarter from Sears will be so bad that people will voice concern on the company getting the inventory it needs to drive its business during the holiday season," he wrote. "And if it doesn't have the inventory during the most important quarter of the year, look for the market to reason the company could be headed for a financial tailspin sometime in 2017."