News

Sears struggling to stem sales dip, aims to keep cutting costs

Warm temperatures during the latter part of 2015 are continuing to play a key role in retailers' financials.

February 25, 2016

Warm temperatures during the latter part of 2015 are continuing to play a key role in retailers' financials, with Sears Holding the latest to cite mild fall and winter weather as the prime culprit in decreasing sales.

Revenue dipped $796 million to $7.3 billion for the fourth quarter of 2015, compared to revenues of $8.1 billion for the prior year fourth quarter. Comparable store sales declined 7.1 percent during the quarter, and accounted for $458 million of the year-over-year revenue decline, while $291 million of the revenue decline was due to having fewer Kmart and Sears Full-line stores, according to a company release.

Domestic comparable store sales reflect a dip of 7.2 percent for Kmart and 6.9 percent for Sears in the fourth quarter of 2015, yet those figures are an improvement compared to the first three quarters of 2015, according to the release.

"While our fourth quarter comparable store sales were improved over the prior three quarters and January 2016 was our best monthly comparable store sales performance of the year (-4.5 percent), the unseasonably warm weather and the associated competitive promotional environment resulted in higher than expected markdowns and significantly lower gross margin in our key apparel categories," stated Edward S. Lampert, Holdings' chairman and CEO.

"As we head into 2016, we remain committed to restoring Sears Holdings to profitability. We plan to accelerate our transformation into a leading member-centric integrated retailer and take action, where necessary, to optimize our cost structure and improve our gross margin realization," he stated.

The company decreased expenses by approximately $150 million in the fourth quarter of 2015 as compared to the prior year fourth quarter.

"Looking toward 2016, we plan to take actions that will further reduce our costs by between $550 million and $650 million, depending on the overall volume of sales," notes the release.

Debt reduction is also a prime focus this year, according to Rob Schriesheim, Holdings' CFO.

"During 2015, we reduced our net debt position by approximately $1.0 billion as compared to year-end 2014, driven by the successful completion of various strategic actions, including the rights offering and sale-leaseback transaction with Seritage Growth Properties and the amendment and extension of our domestic credit facility. We believe we have substantially enhanced our financial flexibility and achieved our objective of further reducing our reliance on inventory as a source of financing as we execute on our transformation," he stated in the release.

In related company news, Sears Holdings named its second biggest shareholder, Bruce Berkowitz, to the board, according to a Bloomberg report.