Sears shares jump after company reports a profit for holiday quarter

Key Points
  • Sears reports a smaller-than-anticipated decline in same-store sales for the holiday quarter following an earnings pre-announcement last month.
  • The retailer is profitable after receiving a $470 million boost from new U.S. tax legislation.
  • CEO Eddie Lampert says the department store chain made "progress" in 2017.
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Sears Holdings on Wednesday reported a smaller-than-anticipated decline in same-store sales for the holiday quarter following an earnings pre-announcement last month, sending its shares up as much as 17 percent after hours.

The company also announced that on Wednesday it secured a loan of $440 million to use toward a $407 million payment into its pension plans, unleashing 140 of Sears' properties from a ring-fence agreement with the Pension Benefit Guaranty Corporation. It said those properties alone have an appraised value of nearly $980 million.

CEO Eddie Lampert said the department store chain made "progress" in 2017, having entered into a partnership with Amazon to sell Kenmore appliances and DieHard merchandise, expanding its Shop Your Way loyalty program, selling off under-performing assets and improving overall liquidity.

"We will work to build on the progress we made in 2017, including ongoing actions to improve or close unprofitable stores and to unlock the value in our assets," Lampert said in a statement.

Sears' net income totaled $182 million, or $1.69 per share, for the quarter ended Feb. 3, compared with a loss of $607 million, or $5.67 a share, one year ago. The latest quarter's results included a $470 million gain due to new U.S. tax legislation, as well as a $72 million charge related to the impairment of the Sears trade name.

Revenue fell nearly 28 percent to $4.38 billion, as the company operated fewer locations across the U.S.

Same-store sales dropped 15.6 percent overall, while analysts were calling for a drop of 16.4 percent, according to a Thomson Reuters survey. Same-store sales for the Kmart banner were down 12.2 percent, while Sears' same-store sales fell 18.1 percent.

Looking to 2018, CFO Rob Riecker said Sears is planning for annual cost reductions of $200 million, which aren't related to store closures.

The company operated 1,002 stores in total at the end of fiscal 2017, compared with 1,430 a year ago. Already this year, Sears announced it will be closing more than 100 additional stores by April. On Wednesday, though, the company said it will open more smaller concept stores later this year.

"In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, we are taking incremental actions to further streamline our operations to drive profitability," Riecker said in a statement.

Sears has managed to trim its long-term debt to $3.2 billion from $4.2 billion a year ago.

The company had $182 million in cash and equivalents at the end of the fourth quarter, down from $286 million one year earlier. Sears has used roughly $648 million of its $1.5 billion revolving credit facility due in 2020.

As of Wednesday's market close, Sears shares have fallen more than 72 percent from a year ago.

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Sears lays off 220 employees at corporate offices
Sears lays off 220 employees at corporate offices