Sears Holiday Comps Tumble

Shares of Sears Holdings Corp. fell almost 13 percent in after-hours trading following the company’s discouraging report on its declining same-store sales.

Shares of Sears Holdings Corp. fell almost 13 percent in after-hours trading Thursday following the company’s discouraging report on its declining same-store sales.

This story first appeared in the January 10, 2014 issue of WWD.  Subscribe Today.

Sears said in its comparable-store sales in November and December were down 7.4 percent, with Sears’ U.S. stores off 9.2 percent and Kmart’s off 5.7 percent. The figures are worse than those registered for the first 11 months of the fiscal year, which have the company down 3.9 percent, Sears down 4.2 percent and Kmart down 3.7 percent. The firm pinpointed declines in consumer electronics, tools and home appliances in its Sears stores and decreases in consumer electronics, grocery and household, and toys at Kmart.

For the fourth quarter ending Feb. 1, the firm now anticipates a net loss of between $250 million and $360 million, or between $2.35 and $3.39 a diluted share, lighter than the loss of $489 million, or $4.61, registered during the comparable period last year. Stripping out a series of nonrecurring items, adjusted net loss would be between $213 million and $316 million versus and adjusted net loss of $119 million last year.

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Removing a myriad of other items, the company said its earnings before interest, taxes, depreciation and amortization would range from a profit of $65 million to an EBITDA loss of $65 million, whereas adjusted EBITDA for the comparable quarter last year, upon the exclusion of $878 million in impairment charges and other items, was $429 million in the black.

If the projected net losses for the quarter were to be realized, the net loss for the year would be between $1.3 billion and $1.4 billion, higher than the $930 million loss suffered last year.

Shares tumbled 12.6 percent to $37.20 in the early stages of after-hours trading. During the regular trading session, they dropped 3.2 percent to $42.57.

Sears noted its efforts to “proactively transform” the company from a store network to a membership-based omnichannel retailer. During the holiday period, the percentage of sales coming from Shop Your Way members increased to 69 percent from 58 percent during the comparable 2012 months. SYW expense increased $69 million during the first two months of the quarter.

Noting its efforts to spin off its Lands’ End and Sears Auto Center businesses, the company said it had approximately $1 billion of cash on its balance sheet with $2.3 billion in availability through its credit facilities, about $500 million of it through its Sears Canada facility.

“We continue to reduce unprofitable stores as leases expire and in some cases accelerate closings when circumstances dictate,” the firm said.

The news from Sears came at the end of a 24-hour period in which many former participants in the monthly ritual of same-store sales reporting returned to the fray with holiday updates. That virtually drowned out a collection of disappointing monthly reports from stores including Gap Inc., L Brands Inc., The Buckle Inc. and Zumiez Inc., all of which fell below the comp levels expected by analysts surveyed by Thomson Reuters.

Following Macy’s Inc.’s word late Wednesday of a 3.6 percent increase in comps for November and December, coupled with plans for a corporate cost-cutting plan, Thursday brought a series of comp results for the November-December holiday period, along with related revisions in guidance.

American Eagle Outfitters Inc.’s comps during November and December fell 7 percent and it said fourth-quarter profits would be at the low end of its earlier estimate of between 26 and 30 cents a diluted share. Although he expects year-end inventories to finish “on plan,” chief executive officer Robert Hanson said “traffic and sales through Christmas week were on the low end of our expectations” and that the “highly promotional” retail climate pressured both margins and profits.

The trend lines were friendlier to Abercrombie & Fitch Co., which prepared investors for a tough quarter back in November.

It reported that its comps, including e-commerce, were down 6 percent so far in the quarter, with a 4 percent decline in the U.S. helping to balance a 10 percent decrease in international markets.

Abercrombie originally anticipated a low-double-digit decline in comps during the quarter. Assuming comps below the quarter-to-date trend in January, the firm now expects adjusted net income for the full year of between $1.55 and $1.65, 15 cents above the previous range estimates. That implies fourth-quarter adjusted net income of between 96 cents and $1.06 a share in the fourth quarter, better than the 89 cents expected, on average, by analysts.

Shares jumped 14.4 percent, to $38, in after-hours trading. They were up 0.9 percent to $33.21 during the day.

Aéropostale Inc. didn’t disclose results along with its teen sector peers but became a subject of heightened speculation after it canceled plans to appear at the ICR XChange in Miami next week. With recent results weak and its stock in retreat — shares declined 30.1 percent last year — Wall Street’s attention turned to a possible takeout of the chain. Several private equity firms — including Sycamore Partners, Hirzel Capital Management and Crescendo Partners — have picked up stakes in the retailer and urged it to take action, prompting the company in November to adopt a poison pill. Shares rallied 3.9 percent to $8.97.

Urban Outfitters Inc. reported a 3 percent increase in comps for November and December, with gains of 11 percent at Anthropologie and 21 percent at Free People offset by the namesake brand’s 6 percent decline.

Among the monthly comp reporters, L Brands and its Victoria’s Secret and Bath & Body Works nameplates fell shy of analysts’ estimates with respective comp gains of 2, 2 and 3 percent. The company pulled down its fourth-quarter profit estimate to $1.60 a share, from a range of between $1.67 and $1.82.