Sears Estimates Better-Than-Expected Q1 Report

Ad for Sears' Kardashian Kollection. The retailer reports an upswing in apparel/accessories sales.

Hoffman Estates, IL—Providing a glimpse into its upcoming first quarter results, Sears Holdings said today that comparable store sales at its Sears and Kmart stores fell only 1.3% during the quarter, better than expected.

The company revealed the numbers ahead of its annual meeting on Wednesday when Edward Lampert, its chairman, is expected to speak and possibly discuss more assets sell off or licensing agreements. That could include selling off its Land’s End division, or even Sears Canada.

By store division, Sears is expected to post a comparable store sales decline of 1%, and Kmart a 1.6% decline. While both units are expected to show weakness in electronics and appliances, Sears reportedly had double-digit increases in apparel and footwear and Kmart had gains in those categories too.

Moreover, Sears said it expects to show its first quarter report will show earnings from continuing operations of $1.46 to $1.84 a share, compared with a loss from continuing operations of $1.53 a share a year ago.

$100 Million Improvement in Earnings?

The estimate includes gains from the sale of certain U.S. and Canadian stores. Even if the $235 million gain from the sale of the stores excluded from the figures, Sears would still have posted about a $100 million improvement in earnings, analysts noted.

Analysts’ average estimate expects the company to show a loss of $1.69 a share.

“Sears demonstrated improvement in its operating performance and its inventories, which translates into a more efficient use of capital,” Rob Schriesheim, chief financial officer, said.

Sears also expects to end the quarter with about $8.9 billion in inventories, down from $9.7 billion of inventory last year.

In February, Sears Holdings reported a $2.4 billion loss in its fourth quarter, its largest in at least nine years. The company said it would spin off its faster-growing Hometown and Outlet stores to raise $400 million to $500 million, a range company reaffirmed.

Still, “while these results are a nice recovery from the fourth quarter, they still do not point to the cash flow trends necessary to finance the business without selling additional assets,” said Gary Balter, retail analyst at Credit Suisse. “This is not a problem for 2012…but we continue to look out to 2013.”

 

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