Sears Holdings Corporation reported its second quarter 2013 results.
Highlights:
- Net loss attributable to Holdings' shareholders of $194 million, or $1.83 loss per diluted share, compared to $132 million, or $1.25 loss per diluted share, in the prior year quarter;
- Adjusted EBITDA of $(55) million for the second quarter of 2013 compared to $116 million in the prior year quarter;
- Adjusted loss per diluted share for the quarter of $1.46 and $1.06 in 2013 and 2012, respectively;
- Second quarter 2013 included gains on the sale of assets of $58 million, after tax and noncontrolling interest, from the sale of certain U.S. and Canadian stores and leasehold interests. These transactions generated approximately $277 million of cash proceeds;
- In the second quarter of 2013, Kmart comparable store sales declined 2.1%, Sears Domestic declined 0.8% and Sears Canada declined 2.5%;
- Our online business on sears.com and kmart.com grew 20% over the prior year second quarter;
-Our Shop Your Way membership program is continuing to gain traction with our members as members continue to engage in all aspects of our program, including points and other program benefits. Shop Your Way members generated over 65% of our revenues at Sears Domestic and Kmart during the quarter, as compared to over 55% in the prior year quarter;
- Gross margin rate decreased 210 basis points for the second quarter of 2013 compared to the prior year second quarter; and
- Domestic inventory declined $968 million from the prior year second quarter. Excluding the inventory related to Sears Hometown and Outlet Stores, Inc. ("SHO"), Domestic inventory declined approximately $564 million.
"We made meaningful progress this quarter in our transformation to a member-centric company. Shop Your Way members represented over 65% of our sales and they redeemed rewards points at a significantly higher rate than last year.
"While the increase in Shop Your Way promotional activity and member redemptions resulted in a meaningful increase in our costs, it demonstrates that our members are deepening their engagement with our program which will allow us to further accelerate our transformation," commented Eddie Lampert, Sears Holdings' Chairman and Chief Executive Officer. "At the same time, we recognize how important it is to improve the profitability of our company and I am disappointed that we did not deliver a better result."
Second Quarter Revenues and Comparable Store Sales
Revenues decreased $596 million to $8.9 billion for the quarter ended August 3, 2013, as compared to revenues of $9.5 billion for the quarter ended July 28, 2012. The decrease in revenue was primarily due to the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for approximately $210 million of the decline.
Revenues were also impacted by approximately $195 million attributable to the separation of SHO, which occurred in the third quarter of 2012. We recorded revenues from SHO of approximately $450 million, primarily related to merchandise sold to SHO for resale, in the second quarter of 2013.
The prior year quarter included revenues of approximately $645 million related to SHO merchandise sales to its customers. In addition, our revenues were impacted by lower domestic comparable store sales, which accounted for approximately $100 million of the decline. Second quarter revenues also included a decrease of $13 million due to foreign currency exchange rates.
For the quarter, domestic comparable store sales declined 1.5%, comprised of decreases of 2.1% at Kmart and 0.8% at Sears Domestic. The decline at Kmart reflects decreases in our transactional categories, such as grocery & household, pharmacy and drugstore. It also includes declines in consumer electronics and toys. These decreases were partially offset by increases in the footwear and lawn & garden categories.
Sears Domestic comparable store sales declined 0.8% due to a decrease in the home appliance category, which was partially offset by increases in the lawn & garden, apparel and home categories. The Sears Domestic apparel category has now achieved comparable store sales increases for eight consecutive quarters.