‘Terrible’ holiday sales don’t dampen Sears Holdings’ outlook for 2014
Despite a dismal holiday season, Sears Holdings is on track to improve things this year, according to its chief executive. “2013 — especially the tough-to-terrible holiday season for Sears Holdings and for so many other retailers — brought into stark relief just how irrevocably retail has changed,” said Chairman and CEO Edward S. Lampert this week in a letter to investors. “2013 highlights just how important all of our work is to transform Sears and Kmart from traditional brick-and-mortar stores that simply sell products into an integrated platform.”
Sears Holdings posted a $358 million loss for its fiscal fourth quarter (ended Feb. 1) and a $1.4 billion loss for the full year. Fourth-quarter revenues fell by $1.7 billion year on year, to $10.6 billion, attributable primarily to a 6.4 percent companywide drop-off in U.S. same-store sales, as well as the impact of having fewer Kmart and Sears stores in operation, the retailer said. Fourth-quarter same-store sales fell by 5.1 percent at U.S. Kmart stores and by 7.8 percent at U.S. Sears stores. Sears Canada, meanwhile, sustained a 6.4 percent same-store sales decline for the quarter.
Despite the sales declines, though, Lampert noted that Sears Holdings has been able to add customers to its Shop Your Way omni-channel loyalty program, on which the company has pinned hopes for future sales growth. The program encourages Sears and Kmart customers to seamlessly shop the retailer’s stores and websites and includes such services as a pickup system whereby customers may order online and pick up their purchases at stores without having to exit their cars. Sales derived from Shop Your Way members last year grew to 69 percent of total Sears and Kmart sales, up from 59 percent last year. “Our online and multichannel businesses grew 10 percent over the prior full year,” Lampert wrote. “The investments we made throughout 2013 are enabling us to learn more about how our members want to shop so that we can develop deeper relationships with them and provide them with access to the widest possible assortment of products and services.”
Meanwhile, declining revenues should not scare off investors, because Sears holds $1 billion in cash, plus a vast portfolio of real estate holdings it could sell, according to CFO Robert A. Schrieshelm. “We have demonstrated our ability and willingness to monetize assets,” he said in a press release. Schrieshelm said Sears Holdings has generated about $4 billion over the past two years by selling and reconfiguring stores and subletting spaces within stores. The company has plans to raise an additional $1 billion this year by selling the Sears Auto Center business and squeezing more profits out of Sears Canada, he says. “We also continue to reduce unprofitable stores as leases expire and in some cases accelerate closings when circumstances dictate,” he said.
The company reports that long-term debt and capital lease obligations totaled $2.9 billion as of Feb. 1, up from $2 billion a year ago.