Sears to mark down the value of its name for third year in a row

Key Points
  • Fiscal 2017 is the third consecutive year Sears will report an impairment charge tied to its trade name.
  • The charge is expected to be between $50 million and $100 million.
  • A year ago, that charge was $381 million; in fiscal 2015, the charge was $180 million.
A Sears store in White Plains, New York.
Scott Mlyn | CNBC

Sears Holdings on Thursday said it expects to record an impairment charge tied to its trade name of between $50 million and $100 million for fiscal 2017.

This marks the third consecutive year the department store owner has reported such a charge, which lowers the value of a company's intangible assets — including its brand names, favorable lease commitments and shopper loyalty.

A year ago, that charge was $381 million for Sears. In fiscal 2015, the charge was $180 million.

"The writedown is an accounting exercise which ultimately results from decreases in our revenues," a Sears spokesman told CNBC. The company also on Thursday revealed that sales in the fourth quarter of 2017 should come in around $4.4 billion, compared with revenue of $6.1 billion a year ago.

U.S. companies started recording these impairment charges in the early 2000s, when the Financial Accounting Standard Board began asking businesses to assess the value of their assets on a yearly basis.

J. Crew, Lands' End (which was once owned by Sears), Sprint and other retailers have also recorded charges tied to their trade names in recent years.

In its 10-K filing for fiscal 2016, Sears said the last writedown of $380 million reduced its intangible assets' carrying value to $431 million as of Jan. 28, 2017. In addition to Sears, this total includes the Kenmore and DieHard names. The carrying value of those intangible assets was $812 million at the start of 2016.

Sears has said it's transitioning toward a "less asset-intensive" business, as it closes more underperforming stores and looks to monetize some of its other holdings, including Sears Home Services.