The shares of Sears Holdings (SHLD) are trading lower after reporting its second-quarter financial results showing a profit for the first time in three years, but its revenue declined 22%.
The stock price of Sears Holdings fell more than 4% to $22.34 per share at the time of this writing, around 11:03 AM in New York.
Greenhaven Road Capital commentary for the third quarter ended September 30, 2022. Q3 2022 hedge fund letters, conferences and more Dear Fellow Investors, The Fund is enduring its worst drawdown since inception. We were down again in the third quarter, bringing year -to-date returns to approximately -59%. Returns vary by . . . SORRY! This Read More
Sears Holdings generated a profit of $208 million or ($1.84 per share) including its gain from real estate deal in the second quarter. Excluding its real estate gain, the company would have reported a net loss of $256 million. During the same period last year, the company recorded a net loss of $573 million.
The retailer’s revenue for the period declined $1.8 billion or 22% to $6.2 billion from $8 billion in the same quarter a year ago. Sears Holdings explained that the decline was primarily related to its actions last year to streamline its operations and focus on its transformation into a member-centric retailer.
Sears Holdings said its comparable store sales dropped 10.8% during the quarter. Kmart and Sears Domestic comparable store sales declined 7.3% and 14%, respectively. The company’s gross margin fell $307 million.
The company reported a $424 million decline in selling and administrative expenses and realized a significant tax benefit from the deferred taxes related to indefinite-life assets associated with the properties sold in the Seritage deal.
Sears Holdings ended the quarter with $1.8 billion in cash, $657 million of letters of credit outstanding, and no revolver borrowing. Its credit agreement availability was around $1.2 billion. The company showed that it has the financial flexibility to meet its obligations and finance its transformation initiatives.
Sears Holdings (SHLD) is positioned for long-term success
In a statement, Sears Holdings Chairman and CEO Edward Lampert said, “The second quarter marked our fourth consecutive quarter of improved results. During the quarter, we completed many of the objectives we laid out to transform Holdings from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging our Shop Your Way platform.”
Lampert also expressed confidence that the company is positioned for long-term success after completing its initiative to transform into a member-centric integrated retailer.
“As our results over the last four consecutive quarters demonstrate, we are successfully enhancing our margin rates and improving EBITDA performance as we become more efficient with our promotional programs and the use of Shop Your Way to replace more traditional forms of marketing with more targeted and personalized digital interactions with our members,” added Lampert.