Sears Holdings (SHLD) Stock Falls On Double-Digit Sales Decline

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The shares of Sears Holdings are trading lower after the company released an update to its financial performance, which shows a double-digit comparable store sales decline in the second quarter.

The stock price of Sears Holdings plummeted 7.59% to $19.91 per share at the time of this writing around 11:19 A.M. in New York.

Sears estimated second quarter performance

Sears Holdings estimated that its total comparable store sales declined 10.6% quarter to date. According to the company, its total comparable store sales performance included a 6.9% drop in Kmart and a 13.9% decline in Sears Domestic.

The retailer expected to record its fourth consecutive quarter of improved adjusted EBITDA in the range of $ (189) million to $ (248) million excluding significant items in the second quarter. During the same period a year ago, Sears Holdings posted $(289) in adjusted EBITDA.

Sears Holdings expected to report a significant gain related to the Seritage transaction, which also resulted in a substantial tax benefit. The retailer estimated a gain of approximately $1.4 billion of which, $510 million would be reported in the second quarter. The remaining $900 million would be deferred and recognized over the term of the leases. The company calculated a tax benefit of $240 million.

The company expected its net income in the range of around $155 million to $205 million or approximately $1.46 to $192 per diluted share including the gain and tax benefit, but excluding final accounting adjustments for the period.

Sears tender offer for senior secured notes due 2018

Sears Holdings announced the start of its tender offer for its 6 5/8% senior secured notes due 2018. According to the company, the total amount of its outstanding notes is $1,238,000,000.

The tender offer is scheduled to expire on August 28 at around 11:59 PM in New York. Jefferies serves as dealer manager for the offer.

Sears Holdings completed its rights offering and sale-leaseback transaction with Seritage on July 7. The company sold 235 real properties and 50% interest in joint ventures with each of General Growth Properties, Simon Property Group and The Macerich Company. The company received $2.7 billion from the deal.

The company expected is total cash and revolver availability to be around $3 billion by the end of the second quarter.

Sears Holdings estimated its usage under its $3.275 domestic credit facility to be around $657 million by the end of the quarter, significantly lower than its total usage of $2 billion last year.

The company said, “With the completion of the amendment and extension of the domestic credit facility and the REIT transaction, we have substantially enhanced our financial flexibility and achieved our objective of reducing our reliance on inventory as a source of financing.”

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