Sears Shocks in Q2 Despite Massive Loss

Sears Holdings Corp. (NASDAQ: SHLD) reported its fiscal second-quarter financial results after the markets closed on Thursday. In a surprising reaction to these results, investors sent shares higher even though this retail chain is on its last legs.

The company said that it had a net loss of $4.68 per share and $3.18 billion in revenue. The same period of last year had a net loss of $2.33 per share and $4.27 billion in revenue.

During the quarter, total comparable store sales declined 3.9%, reflecting Kmart comparable store sales declining 3.7% and Sears comparable store sales declining 4.0%. Additionally, Sears achieved positive comparable store sales in several categories at both Kmart and Sears formats, including apparel, footwear and jewelry.

At the end of the quarter, total cash balances were $441 million, including restricted cash of $248 million, which relates to amounts deposited in escrow for the benefit of pension plans. That is compared to $336 million at February 3, 2018, which included restricted cash of $154 million. Short-term borrowings totaled $1.3 billion at August 4, 2018, consisting of $660 million of revolver borrowings, $570 million of line of credit loans and $24 million of borrowings under the secured loan.

Edward S. Lampert, board chair and chief executive, commented:

While we are encouraged by the improved comparable stores sales trend we experienced in the second quarter, and the positive comparable store sales of 3.0% and 2.5% achieved in the months of July and August, respectively, we have yet to achieve our goal of returning the Company to profitability. We continue to close unprofitable stores, and we are hopeful that we can stabilize our store base at a meaningful level in the near future. Our goal is to right-size our store footprint to a solid base from which we can operate and grow profitably, while leveraging our online and Shop Your Way platforms.

Shares of Sears were last seen up about 14% at $1.38, with a consensus analyst price target of $2.00 and a 52-week range of $1.07 to $7.87.