Closing More Stores Won't Make Sears Losses Look Any Better

Sears Holdings Corp. (NASDAQ: SHLD) reported first-quarter 2018 results before markets opened Thursday. The company posted a diluted loss per share of $3.93 on revenues of $2.89 billion. In the same quarter a year ago, Sears posted earnings per share of $2.29 on revenues of $4.2 billion. The consensus estimates called for a loss of $1.51 on revenues of $2.86 billion.

Sears also announced that it will begin closing 72 more stores out of approximately 100 that it has identified as not profitable.

Last year’s positive earnings were the result of $492 million recognized in the sale of the company’s Craftsman brand.

Total same-store sales declined 11.9% during the quarter, comprised of a 9.5% decline at Kmart and a 13.4% decline at Sears.

Edward S. Lampert, Sears board chair and chief executive, said:

As we look to the remainder of 2018 and beyond, we remain committed to restoring positive Adjusted EBITDA and will continue to explore opportunities to unlock the full potential of our assets for our shareholders. This includes exploring third-party partnerships involving several of our businesses – such as Sears Home Services, Innovel, Kenmore and DieHard – and gaining further momentum around our new smaller store formats that blend brick and mortar and online experiences. We believe these initiatives, among others, will help us to strengthen the Company and better position it for the future.

At nearly the same time, Lampert’s hedge fund, ESL Investments, claims to have received many inquiries from “potential partners” in response to ESL’s suggestion to the Sears board that the company consider selling its Kenmore brand, among other assets. Lampert has asked the Sears board to allow ESL to enter discussions with these “potential partners” in order to put together a “definitive proposal” that will yield the best result for Sears.

Sears did not publish any guidance, but consensus estimates for the second quarter call for a loss of $2.78 per share on revenues of $2.92 billion. For the full year, analysts are looking for a loss of $12.18 per share on revenues of $12.43 billion.

Shares traded down more than 8% Thursday morning at $2.94, in a 52-week range of $1.99 to $10.76. The 12-month price target is $2.00 from just one analyst.