Sears Holdings (SHLD) Misses Q1 EPS by 26c; Domestic Comps Fell 10.9%

Sears Holdings (NASDAQ: SHLD) reported Q1 EPS of ($2.85), $0.26 worse than the analyst estimate of ($2.59). Revenue for the quarter came in at $5.9 billion versus the consensus estimate of $6.08 billion.

For the quarter, domestic comparable store sales declined 10.9%, comprised of a decrease of 7.0% at Kmart and a decrease of 14.5% at Sears Domestic, which contributed to $558 million of the decline.

Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer, said, "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. As our improved EBITDA results over the last three consecutive quarters demonstrate, we are successfully enhancing our margin rates and EBITDA performance as we become more efficient with our promotional programs and the use of Shop You Way to replace more traditional forms of marketing with targeted and personalized digital interactions." Mr. Lampert continued, "With the completion of the joint venture transactions with three leading shopping mall owners and operators, and the advanced formation of the Seritage REIT, we will become more productive with our physical store space. This will position Sears Holdings for long-term success consistent with our focus on our best stores, rewarding our best members and pursuing our best categories to transform Sears Holdings into a leading integrated retail membership-focused company leveraging our Shop Your Way platform."

Rob Schriesheim, Sears Holdings' Chief Financial Officer, said, "In the first quarter of 2015, we continued to unlock the value of our assets, enhance shareholder value, and improved quarterly EBITDA performance on a year-over-year basis for three consecutive quarters. Sears Holdings has consistently demonstrated its ability to both meet all of our short-term liquidity needs and fund the long-term transformation of the Company. We continue to make progress towards the formation of Seritage Growth Properties, a public real estate investment trust or REIT, and its subsequent purchase of properties from the Company. We expect that we will be declared effective by the SEC this week, and are targeting to launch the rights offering on Friday, June 12, 2015, which, if successful, will result in $2.6 billion in cash proceeds to Sears Holdings. When combined with the previously announced joint ventures, this will total $3.0 billion in cash realized. We expect to utilize a portion of the proceeds from the REIT transaction to pay down our existing revolver borrowings. Had the REIT transaction closed in the first quarter, we would have had cash balances of $2.3 billion and availability under our credit facility of over $1.1 billion."

Mr. Schriesheim added, "Consistent with our prior comments on enhancing our flexibility with our capital structure, we have reached agreement with three of our leading ABL lenders, representing $1.175 billion of commitments, on terms pursuant to which they would be willing to amend and extend, to 2020, our $3.275 billion revolving credit facility, currently expiring in April of 2016. We have already initiated discussions with our broader lender group and, if successful, expect to close the refinancing during our second quarter with an extended facility of approximately $2.0 billion maturing in 2020 and the remaining $1.275 billion of the existing ABL in place until April of 2016. Should both the REIT transaction and the amendment and extension of our ABL facility be successful, we will have enhanced our financial flexibility, recapitalized our balance sheet and secured a solid financial foundation to accelerate the investment in our transformation."

For earnings history and earnings-related data on Sears Holdings (SHLD) click here.

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