Retail

Sears loss narrows in the fourth quarter, but revenues continue to erode

A man walks by a Sears store.
Andy Clark | Reuters

Sears on Thursday reported a narrower loss in the fiscal fourth quarter than the period a year earlier, but revenues continued to tumble amid a wave of store closures and declines at its remaining stores.

The company's long-term debt obligations nearly doubled from the prior year, despite the chain's efforts to raise cash by selling off assets.

Amid its ongoing struggles, the retailer took a $381 million charge during the quarter to write down the value of its trade name — highlighting the declining worth of the Sears brand.

Shares of Sears, which have lost nearly 60 percent of their value over the past year, were more than 11 percent higher in premarket trading.

Sears lost an adjusted $1.28 per share during the fiscal fourth quarter, compared with a loss of $1.70 a year earlier, as it benefited from lower payroll, inventory and marketing costs. That figure excluded items including the writedown of its name. On a net basis, the chain lost $5.67 per diluted share.

Revenue, however, continued to slide. Sears rang up $6.05 billion in sales during the holiday period, down 17 percent from $7.3 billion a year earlier.

That decline was mostly attributable to the company's dwindling store fleet, though sales also slid at its remaining shops. Comparable revenues were down 10.3 percent, driven by an 8 percent drop at Kmart and a 12.3 percent decline at Sears.

"While the challenging holiday selling season pressured margins and comparable store sales, we were able to successfully improve profitability through disciplined inventory and costs management," Chief Financial Officer Jason Hollar said in a statement. "We will continue to take actions to drive profitability, generate liquidity and adjust our overall capital structure while continuing to meet all of our financial obligations."

Indeed, Sears has made many maneuvers to bring itself back to profitability. In February, the chain said it would close 150 stores and reorganize the business to save $1 billion annually. And on Thursday, it completed the sale of its Craftsman brand to Stanley Black & Decker for an initial upfront cash payment of $525 million with additional payments over time.

Sears plans to use some of the proceeds from these transactions, as well as anticipated improvements in its profitability and working capital, to reduce its overall debt and pension obligations by at least $1.5 billion this fiscal year. The company's pension plan has been a significant source of cash burn over the past 12 years, with Sears paying out nearly $4 billion to it over that time.

In January, the company said it had taken steps to shore up its liquidity by up to $1 billion. That injection is tied to a $500 million real-estate-backed loan, and a secured standby letter of credit facility worth up to $500 million. That letter of credit, from affiliates of CEO Eddie Lampert's hedge fund, ESL Investments, was announced in December.

At the end of the fourth quarter, Sears had $286 million in cash and cash equivalents, compared with $238 million a year earlier. It had no short-term borrowings. However, the company's total long-term debt, including capital lease obligations, was $4.2 billion. That compares with $2.2 billion a year earlier.