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Sears posts steep loss of $558 million but signs of improvement lift stock

Thursday, November 30, 2017  
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By: Nathan Bomey, USA TODAY


Sears Holdings reported a third-quarter loss of more than half-a-billion dollars, but signs of improvement inspired confidence in investors as the ailing department-store chain seeks stability.

After more than 400 recently announced store closures aimed at removing its weak spots, Sears said Thursday that it lost $558 million for the quarter ended Oct. 28.

Despite the red ink, investors were heartened, as Sears stock soared 26.6% in pre-market trading to $5.33.

With the holiday shopping season in full swing, Sears faces a crucial test, as shoppers increasingly flock online or to the retailer's nimbler physical competitors.

Like other retailers, the company is aiming to bolster its shop-online-pick-up-in-store options to generate more business. Sears is also betting on a ramped-up loyalty program, called Shop Your Way, to lure customers.

For the third quarter, sales at stores open at least a year — a key gauge of health in the retail sector — tumbled 15.3%. Sears stores suffered the worst with a 17% decline, while the company's Kmart stores declined 13%.

"We remain focused on streamlining our operations, right-sizing our store footprint, reducing our operating expenses and taking incremental actions to further improve our financial performance despite a challenging retail environment," Sears Chief Financial Officer Rob Riecker said in a conference call.

The retailer warned that the closure of many Kmart pharmacies was one reason for its 27.2% decline in revenue to $3.66 billion.

The company's third-quarter net loss was better than a $748 million loss posted in the same quarter last year. The loss and revenue reduction came after a flurry of moves, which included several hundred store closures, steep cost cuts and property sales.

A $1.25 billion cost-cutting campaign in 2017 has helped the company avoid a potentially fatal event for the year — after the company warned in March that there was "substantial" doubt it would survive in the long run.

Sears hinted Thursday, without providing details, that it would take further actions soon with upcoming debt payments to achieve more "financial flexibility and enhanced liquidity."

There are incremental signs of improvement. Earnings before interest, taxes, depreciation and amortization improved from a $375 million loss to a $275 million loss.

Sears had warned on Nov. 8 that its same-store sales had fallen 15.3% for the quarter while saying that its net loss would range from $525 million to $595 million.

The company concurrently announced a deal with a U.S. government pension board to regain the right to monetize nearly 140 locations. All of the proceeds from the sales or financing deals — estimated at $407 million — will be used to fund a pension plan that still supports about 100,000 beneficiaries.

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