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Last Update: 27-Dec-11 10:05 ET
Sears Down Sharply After Reporting Same-Store-Sales; Announcing It Will Close Stores
Sears Hldg (SHLD $37.06 -8.79) is trading sharply lower after the company announced this morning that quarter-to-date same store sales are down 5.2% and that the company will close 100-120 Kmart and Sears full-line stores.
The company provided a quarter-to-date performance and planned actions to improve and accelerate the transformation of its business. Co's total sss QTD is -5.2%. Kmart's QTD comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales. Sears Domestic's quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics. The combination of lower sales and continued margin pressure coupled with expense increases has led to a decline in adj. EBITDA.
Accordingly, the company expects that fourth quarter consolidated Adj. EBITDA will be less than half of last year's amount (vs $933 mln of Adjusted EBITDA in fourth quarter 2010). The company expects that it will record in the fourth quarter a non-cash charge related to a valuation allowance on certain deferred tax assets of $1.6-1.8 bln. Specific actions which co plans to take include: Close 100-120 Kmart and Sears Full-line stores. The company expects these store closures to generate $140-170 mln of cash as the net inventory in these stores is sold and expects to generate additional cash proceeds from the sale or sublease of the related real estate. Ex-the effect of store closures, company currently expects to reduce 2012 peak domestic inventory by $300 mln from the 2011 level of $10.2 bln at the end of the third quarter as a result of cost decreases in apparel, tighter buys and a lower inventory position at the beginning of the fiscal year. The company also plans to reduce fixed costs by $100-200 mln. The company currently expects the store closure and inventory reduction actions to reduce peak inventory in 2012 by $500-580 mln and reduce peak borrowing need by $300-350 mln in 2012 from levels that may have resulted in 2012 without such actions.
The company provided a quarter-to-date performance and planned actions to improve and accelerate the transformation of its business. Co's total sss QTD is -5.2%. Kmart's QTD comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales. Sears Domestic's quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics. The combination of lower sales and continued margin pressure coupled with expense increases has led to a decline in adj. EBITDA.
Accordingly, the company expects that fourth quarter consolidated Adj. EBITDA will be less than half of last year's amount (vs $933 mln of Adjusted EBITDA in fourth quarter 2010). The company expects that it will record in the fourth quarter a non-cash charge related to a valuation allowance on certain deferred tax assets of $1.6-1.8 bln. Specific actions which co plans to take include: Close 100-120 Kmart and Sears Full-line stores. The company expects these store closures to generate $140-170 mln of cash as the net inventory in these stores is sold and expects to generate additional cash proceeds from the sale or sublease of the related real estate. Ex-the effect of store closures, company currently expects to reduce 2012 peak domestic inventory by $300 mln from the 2011 level of $10.2 bln at the end of the third quarter as a result of cost decreases in apparel, tighter buys and a lower inventory position at the beginning of the fiscal year. The company also plans to reduce fixed costs by $100-200 mln. The company currently expects the store closure and inventory reduction actions to reduce peak inventory in 2012 by $500-580 mln and reduce peak borrowing need by $300-350 mln in 2012 from levels that may have resulted in 2012 without such actions.
