Struggling Sears Holdings, parent company of Sears and Kmart, reported rare net income of $208 million for the second quarter ended Aug. 1, the first since 2013, but it was due to income from property sales. Overall revenue decreased 27.3% to $6.2 billion, with same-store sales down at both Sears (-14%) and Kmart (-7.3%).
Backing out the asset sales, Sears Holdings showed a quarterly net loss of $256 million or $2.40 per share, compared to a loss of $293 million or $2.76 per share in the year-ago quarter.
Sears Holdings CFO Rob Schriesheim said the company has become more efficient in its promotional programs and the Shop Your Way omnichannel program, replacing traditional forms of marketing with more targeted and personalized digital interactions.
“We continue to make progress in our transformation from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging Shop Your Way,” Schriesheim said in a pre-recorded presentation. This includes a membership-based approach that leverages customer data to more precisely market its merchandise, while reducing its reliance on big-box stores. He added this transformation has allowed Sears Holdings to improve its EBITDA for four consecutive quarters.
By spinning out a real estate investment trust called Seritage Growth Properties last year, which leased the store properties back to Sears, the company was able to generate $2.7 billion in income, Schriesheim said.
Sears ended the quarter with $1.8 billion in cash and $1.2 million from its domestic credit facility, “providing us with a solid financial foundation to accelerate the investment in our transformation,” he said.
Schriesheim said Sears’s move to a reliance on partners to sell home electronics has negatively impacted same-store sales, but the less capital intensive approach has improved profits, “which is our primary focus.”
Since the second quarter of 2013, he said, Sears has reduced its inventory by about $1.5 billion through productivity improvements and the closure of unproductive stores.