Sears Holdings Corp. still has plenty of work on its hands, even if it doesn’t have as much inventory.
The Hoffman Estates, Ill.-based firm’s second-quarter earnings dropped 62.4 percent, even with a big accounting boost, and half a billion dollars in inventory was cleared out, lessening the need to mark down goods in the second half.
Earnings at the corporate parent of both Sears and Kmart dropped to $65 million, or 50 cents a diluted share, from $173 million, or $1.15, a year ago. The most recent quarter included a $37 million aftertax benefit stemming from the overturning of a jury verdict related to the redemption of certain Sears bonds in 2004.
Sales dipped 4.1 percent to $11.76 billion from $12.26 billion, with comparable-store sales down 6.7 percent at domestic Sears stores and 5.6 percent at Kmart.
Despite the drop-off in its financial results, Sears managed to take part in a broader retail rally on Wall Street and saw its stock rise 4.2 percent to $90.62 Thursday.
“While it was a difficult quarter, we were successful in reducing our domestic inventory levels by $500 million, which should lead to lower markdowns and favorably impact our gross margin rates in the second half,” said W. Bruce Johnson, interim chief executive officer and president.
At the end of the quarter, U.S. inventories totaled $8.9 billion, down from $9.4 billion a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization for the U.S. business fell 49.7 percent to $246 million from $489 million — as a percentage of sales, that’s a drop to 2.4 percent from 4.5 percent.
Ana Lai, a credit analyst at Standard & Poor’s, said the second-quarter results were in line with expectations for a poor showing from the company overall this year.
“It didn’t look disastrous,” said Lai. “We continue to think that they will have a difficult time executing in this environment that’s highly competitive.”
She described the apparel business as “very weak.”
“They get so much competition on that category that it’s very hard for them to improve it,” said the analyst.
The firm is controlled by chairman and hedge fund manager Edward Lampert, who bought Kmart out of bankruptcy and later put the chain together with Sears. In January, Lampert shifted the firm’s corporate model to that of a holding company, which owns five types of operations, including brand and real estate businesses.
What changes the switch to that model will ultimately bring about remains to be seen.
“In a world that has Wal-Mart, Target and Costco, there’s no place for Sears,” said Love Goel, chairman and ceo of Minnetonka, Minn.-based Growth Ventures Group, a private equity firm that buys retail companies.
“Sears has outlived its use for the American consumer,” said Goel, who was a consultant to Sears in the Nineties. “That sounds pretty harsh, but that doesn’t mean I don’t love Sears or think the Sears brand has legs. It just can’t be this massive big box, if you will. That cost structure is unjustified.”
Goel said the clock is running on Lampert.
“At the end of two years, either this is going to work or it’s going to be a disaster and it’s going to get sold off,” he said.
For the first half, the company’s earnings fell to $9 million, or 7 cents a diluted share, from $396 million, or $2.60, a year ago. Sales fell 4.9 percent to $22.83 billion from $24 billion.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)