Sears Holdings Q4 loss widens, 17% decline in revenues
Staff Writer |
Sears Holdings reported a wider loss for the fourth-quarter ended January 28, 2017, reflecting higher impairment charges and lower revenue.
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The year-over-year 17 percent decline in revenues was primarily attributable to having fewer Kmart and Sears full-line stores in operation.
Edward Lampert, chairman and chief executive officer, said, "We delivered significant Adjusted EBITDA improvement in the fourth quarter, reflecting our firm focus on profitability to offset ongoing revenue pressures."
Net loss attributable to Holdings' shareholders for the fourth quarter of 2016 widened to $607 million or $5.67 per share from $580 million or $5.44 per share in the prior year fourth quarter.
The latest-quarter result included a non-cash accounting charge of $381 million related to the impairment of the Sears trade name. The prior year-quarter result included a non-cash accounting charge of $180 million related to the impairment of the Sears trade name.
Adjusted for significant items, it would have reported a net loss attributable to Holdings' shareholders of $137 million or $1.28 per share for the fourth quarter of 2016 compared to a net loss of $181 million or $1.70 per share in the prior year quarter.
Adjusted EBITDA was negative $61 million in the fourth quarter of 2016 compared to negative $137 million in the prior year fourth quarter.
Jason Hollar, Holdings' CFO, said, "While the challenging holiday selling season pressured margins and comparable store sales, we were able to successfully improve profitability through disciplined inventory and costs management. We will continue to take actions to drive profitability, generate liquidity and adjust our overall capital structure while continuing to meet all of our financial obligations."
Revenues for the quarter declined about 17 percent to $6.1 billion from $7.3 billion for the prior year fourth quarter. Analysts expected revenue of $5.89 billion for the quarter.
The year-over-year decline in revenues was primarily attributable to having fewer Kmart and Sears Full-line stores in operation, which accounted for $596 million of the revenue decline, as well as a 10.3% decline in comparable store sales for the quarter, which accounted for $555 million of the revenue decline.
At Kmart, comparable store sales decreased 8.0% during the fourth quarter primarily driven by declines in the consumer electronics, grocery & household, apparel and toys categories.
Sears Domestic comparable store sales decreased 12.3% during the quarter, primarily driven by declines in the home appliances, apparel, consumer electronics and tools categories.
Separately, Sears Holdings announced that it has closed sale of the Craftsman brand to Stanley Black & Decker for a net present value of over $900 million.
As part of the closing, the company received an initial upfront cash payment of $525 million subject to closing costs and an adjustment for working capital changes.
In addition, Stanley Black & Decker will pay a further $250 million in cash in three years and Sears Holdings will receive payments of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products for the next 15 years.
In connection with the closing of the Craftsman transaction, the company reached an agreement with the PBGC pursuant to which the PBGC has consented to the sale of the Craftsman-related assets that had been "ring-fenced" under the March 2016 pension plan protection and forbearance agreement between the PBGC and the company and certain related transactions.
As a condition to obtaining this consent, the company agreed to grant to the PBGC a lien on, and subsequently contribute to the company's pension plans, the value of the $250 million cash payment payable to the company on the third anniversary of the Craftsman closing, with the value of such payment being fully credited against certain of the company's minimum pension funding obligations in 2017, 2018 and 2019.
The company also granted a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the company's pension plans, with such payments to be credited against the company's minimum pension funding obligations starting no later than five years from the closing date.
The company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the company's minimum pension funding obligations through the end of 2019, and agreed to certain other amendments to the PPPFA. ■