Sears rallies on sales beat, says more Kmart stores closing

By Retail FOXBusiness

Future of Sears, Kmart, JC Penney in doubt?

Former Walmart U.S. CEO Bill Simon on the future of retailers such as Sears, Kmart and JCPenney and the impact online shopping has on brick-and-mortar retailers.

Sears Holdings (SHLD) on Thursday reported another quarter of weaker sales and red ink, but shares rallied as the floundering retailer beat forecasts.

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Sears, once the largest retailer in America, has closed hundreds of stores and sold off assets in an effort to improve its bottom line. Sears has lost more than $10 billion since 2011, reflecting a sharp decline in traffic inside Sears and Kmart stores. In the second quarter, sales at stores open at least a year dropped 11.5%.

The Hoffman Estates, Illinois-based company still managed to narrow its losses to $251 million, compared to $395 million a year ago. On a per-share basis, Sears lost $2.34 during the period ending July 29, not as bad as the $2.48-per-share loss that analysts predicted.

Total revenue of $4.37 billion surpassed Wall Street’s estimate of $4.21 billion. Revenue was down 22% year-over-year primarily due to store closures, which accounted for $770 million in lost sales.

An additional 28 Kmart stores will close later this year, Sears said. The company already planned on shutting down 150 Sears and Kmart locations by the end of the current quarter.

Sears also announced that a deal with MetLife (MET) will annuitize $512 million of pension liabilities, further reducing pressure on the company’s retirement program. MetLife will pay future pension benefits to about 20,000 retired employees.

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Sears jumped 8.9% to $9.33 in recent trading. The stock is down 37% over the past year.

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Questions over Sears’ future have mounted this year, particularly after the company noted in a securities filing that historical operating results indicate “substantial doubt” about its ability to stay afloat. Fitch, the credit-rating firm, had identified Sears as one retailer in danger of defaulting on its loans.

Sears later clarified its SEC filing, saying it remains a viable business. Meanwhile, CEO Eddie Lampert assured investors in May that Sears can return to profitability, adding that Sears is attracting enough shoppers.

Bill Simon, the former CEO of Walmart’s (WMT) U.S. business, said struggling retailers like Sears and JC Penney (JCP) must stand out from the crowd in order to turn things around.

“I think companies that aren’t differentiating today—they’re not famous for something [and] they’re stuck in the middle—are going to find it really, really difficult to move forward,” Simon said in an interview with Stuart Varney on FOX Business Network’s “Varney & Co.”

Sears plans to cut $1 billion in costs in 2017 by selling real estate, among other moves. Sears also completed the sale of Craftsman to Stanley Black & Decker (SWK) earlier this year.

Sears continues to explore its options for Kenmore, DieHard and Sears Auto Center. This week, Sears said it would expand distribution of Kenmore vacuums and DieHard flashlights and alkaline batteries to other retailers. The move followed an agreement with Amazon.com (AMZN) to sell Kenmore appliances on the website.

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