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Sears Holdings' Q2 Loss Widens

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Sears Holdings Corporation reported second-quarter fiscal 2013 adjusted loss per share of $1.46 per share, substantially widening from the year-ago quarter’s loss per share of $1.06. Including special items, the company’s reported loss reached $1.83 per share compared with a loss per share of $1.25 in the prior-year period.

Quarterly Detail

Revenues declined 6.3% to $8,871 million compared with $9,467 million in the year-ago quarter, primarily due to separation of Sears Hometown and Outlet business, reduction in the number of Kmart and Sears’ full-line stores in operation during the quarter and lower comparable store sales.

Segment-wise, sales at Sears Domestic fell 5.5% to $4,783 million, while Kmart sales declined 6.1% to $3,168 million. Moreover, sales at Sears Canada registered a decline of 10.8% to $920 million.

The company witnessed a 1.5% decline in domestic comparable store sales, comprising a 2.1% fall at Kmart stores and 0.8% fall at Sears Domestic. Moreover, Sears Canada reported comparable store sales decline of 2.5% during the quarter.

The comparable store sales decline at Kmart stores was due to weak performances in most categories with grocery & household, pharmacy and drugstore being the most prominent. Comps at Sears Domestic mostly suffered due to weak performance of the home appliances category, which was partially offset by improvement in the lawn & garden category, as well as increases in the apparel and home categories.

Adjusted gross profit declined 7.5% to $2,193 million compared with $2,371 million reported in the second quarter of fiscal 2012. Consequently, gross profit margin contracted 32 basis points to 24.72%. The company’s adjusted selling and administrative expenses marginally declined to $2,248 million from $2,254 million.

Adjusted loss before interest, tax and depreciation in second-quarter fiscal 2013 was $55 million, substantially below the adjusted EBITDA of $116 million earned in the year-ago comparable quarter. Adjusted operating loss came in at $235 million compared with a loss of $71 million in the year-ago quarter.

Balance Sheet and Cash Flow

Sears Holdings ended the quarter with cash and cash equivalents (including restricted cash) of $681 million and long-term debt and capitalized lease obligations of $1,911 million, compared with a cash balance of $738 million and long-term debt and capitalized lease obligations of $1,970 million at the end of the year-ago quarter. The company’s shareholder equity was $2,824 million as of Aug 3, 2013.

Other Stocks to Consider

Sears Holdings currently carries a Zacks Rank #3 (Hold). Other stocks worth considering in the retail-wholesale space are Conns Inc. (CONN - Free Report) , Best Buy Co., Inc. (BBY - Free Report) and GameStop Corp. (GME - Free Report) . All these stocks have a Zacks Rank #2 (Buy).

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