Sears' Loss Slims but It's Still a Sinking Ship
Sears Holdings posted first-quarter earnings on Monday, and while the report did have a few positives, it was still a characteristically ugly quarter for the retailer.
Companywide, same-store sales fell 10.9%, dropping 7% at Kmart and 14.5% at Sears locations. Despite the decline in comparable sales, gross margin at both divisions improved due to cost-cutting efforts. The company's net loss narrowed modestly from $3.79 per share to $2.85 per share.
Sales in the quarter fell by $2 billion or 25% to $5.9 billion as the company spun offLands Endand sold part of its stake in Sears Canada, and closed several stores. The decline in comparable sales led to $558 million decrease in revenue.
Rewards ain't enoughAs Sears continues to focus on selling assets to fund its hopeful turnaround, management still seems out of touch with the realities on the ground. CEO Eddie Lampert told investors, "During the first quarter, we made significant progress in our transformation from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging our Shop Your Way platform."Regardless if that description, Sears is still a very traditional brick-and-mortar retailer.
Management has been touting its Shop Your Way rewards program for a while, noting that rewards members made up 74% of sales in the quarter.However, at a time when rivals likeAmazon.com,Wal-Martand others are moving to offer speedier delivery and other perks for loyal customers, the advantages of Sears' Shop Your Way program seem dubious.
Unlike Amazon Prime or a Costco membership, the program is free to join, meaning there is little commitment required on the part of the consumer, who only has to give their email address. Once, the customer has joined they are eligible to receive rewards points, making its program identical to ones offered by nearly every other major retailer.Finally, the fact that 74% of sales are already from rewards customers and comparable sales are falling by double digits should be a sign to management that that program is not stemming the losses, nor is it going to save the company.
The article Sears' Loss Slims but It's Still a Sinking Ship originally appeared on Fool.com.
Jeremy Bowman owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.