Sears Holdings Corp. is currently on track to close 330 Sears and Kmart locations this year.

Struggling Sears Holdings Corp. reported second-quarter losses that more than doubled from last year, and were even worse than two years ago.

Sears said Thursday that its loss widened to $508 million, or $4.68 a diluted share, from $250 million, or $2.33, for the second quarter in 2017. Sears’ loss narrowed last year due to financial maneuvers, such as store closures, undertaken by the company to shore up its bottom line. But what’s concerning now, and perhaps no surprise, is the fact that this year’s loss was wider than the loss of $395 million, or $3.70, in the same period in 2016. The company said adjusted EBITDA was a loss of $112 million, compared with a loss of $66 million in the year-ago quarter.

Revenues in the quarter for the Sears and Kmart nameplates combined fell 25.6 percent to $3.18 billion from $4.28 billion, mostly due to store closures. Merchandise sales dropped 28.9 percent to $2.43 billion from $3.41 billion. Comparable-store sales fell 3.9 percent in the period — down 3.7 percent at Kmart stores and down 4 percent at Sears doors. The company said it did see a sequential comps improvement from the first quarter, and that it “achieved positive comparable-store sales in several categories at both Kmart and Sears formats, including apparel, footwear and jewelry.”

Edward S. Lampert, chairman and chief executive officer, acknowledged that the company “has yet to achieve our goal of returning the company to profitability. We continue to close unprofitable stores, and we are hopeful that we can stabilize our store base at a meaningful level in the near future.”

He noted that for the second half of 2018, the company remains focused on identifying additional opportunities to streamline operations and reduce operating costs. He also noted, “We have a responsibility to explore opportunities to unlock the full potential of our assets for our shareholders, including third-party partnerships or the sale of our businesses.”

Lampert, the company’s largest shareholder and the chairman of hedge fund ESL Investments, has used his fund to bail out Sears through various transactions. The latest proposal is for ESL to acquire Sears’ Kenmore brand and the Sears Home Improvement business.

The ceo has been trying to convert the brick-and-mortar model to a member-centric integrated model that includes stores and e-commerce. He said on a blog post on Thursday, “The journey to running a member-centric company on a consistently profitable basis has taken far longer than we expected.” He also cited the changes in consumer shopping patterns at retail, and the long-term legacy pension obligations, which he said has required higher funding levels due to the “historically low interest rates driven by the Federal Reserve policy since the 2008 financial crisis.”

Lampert also said, “Sears needs the support of a wide variety of constituents. We appreciate the support we have received to date, and continue to seek further support.”

The company this year has touted the Sears Auto Center tire installation program with Amazon.com as a nationwide event. It also has added new brands to its Web site, such as floor-care brand Hoover and Oreck, and footwear brands such as G.H. Bass & Co. and Lucky Brand. But one problem remains, and that is how to get more consumers to shop at its stores and web site.

Rob Riecker, chief financial officer, said, “We will continue to evaluate opportunities to optimize our balance sheet and capital structure as we move forward to effectuate our transformation.” The cfo also said that the company is focusing on its best stores, aligning overall cost structure to its core stores and optimally using real-estate assets as collateral.

All those considerations are certainly options that the company has reviewed over the last few years. At this point, all that the “alignment of overall cost structure” really points to is the closing of even more stores, and the sale of additional real-estate assets. Given the transactions that have already taken place, Sears now has fewer choice locations available for sale. And after shedding 358 stores last year, Sears is currently on track to close 330 Sears and Kmart locations — 63 in January, 103 in April, 40 in August, 78 in September and 46 in November — this year.

To put the store closures in perspective, as well as how troubled Sears has been, the company began the year with under 500 Kmart locations and under 1,150 Sears domestic stores. That’s a substantial decline from its more than 3,500 stores in operation when Lampert took Kmart and merged it with Sears, Roebuck & Co. in 2005 in an $11 billion deal to form Sears Holdings. At the time the deal was announced in November 2004, the combined entity was projected to have combined annual revenues of $55 billion.

Sears noted that it will continue to pursue additional real-estate transactions, and added that it is actively “considering means of improving the terms of over $1 billion of its outstanding indebtedness.”

 

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