Sears Guidance Proves That Nothing Can Work There

January 9, 2014 by Jon C. Ogg

Source: Jim Henderson, via Wikimedia Commons
Sears Holdings Corporation (NASDAQ: SHLD) needs to seriously decide what its future will bring. Nothing seems to work, and the guidance it issued after the close of trading on Thursday is just one more atrocious spectacle of what not to do. It really seems that if Sears were ever to become cool again that being cool would be out of style.

Total domestic comparable store sales for the quarter-to-date period were down by a sharp 7.4%. This was a drop of 5.7% at Kmart and a drop of 9.2% at Sears in domestic markets. Here are the blaming points:

  • Kmart: sales decline reflects declines in most categories including consumer electronics, grocery & household and toys.
  • Sears: sales decline is attributable to decreases in most categories including consumer electronics, tools and home appliances.

Sears Canada also said that its comparable store sales for the quarter-to-date period were -4.4%. It turns out that the Canadians must dislike the Sears experience just a bit less than the Americans dislike it.

Sears claims to have continued to proactively transform its business to a member-centric integrated retailer with its Shop Your Way program and platform. Apparently “shopping your way” means shopping away from Sears.  The company said, “We believe that we are making progress in this transformation, as we are seeing continued increases in our SYW member engagement metrics with 69% of our sales in the nine-week period ended January 4, 2014 derived from members as compared to 58% last year.”

The company is telegraphing that it is intentionally transitioning business models, all of which has impacted its margin and expenses. Sears even spent $69 million more on SYW points expenses compared to the same period a year ago.

Sears now expects consolidated Adjusted EBITDA in the fourth quarter of -$65 million to $65 million. That figure was $429 million in last year’s fourth quarter. The company now expects that its reported net loss attributable to shareholders will be between $250 million and $360 million, or between -$2.35 and -$3.39 for the quarter. Sears was only supposed to have a loss of -$0.20 per share if the two analysts that make projections had anything to say.

About the only good news is that was seen was that Sears is considering strategic alternatives for its Sears Auto Center business.

Sears shares closed down over 35 at $42.57, and the stock fell by another 13% to $36.98 in the after-hours market reaction. Oh, and that is a new 52-week low if it holds as the prior 52-week range was $38.88 to $67.50.