Sears Holdings (SHLD) Posts Smaller-Than-Expected Q2 Loss, Revenues Drop 23%

Sears Holdings (NASDAQ: SHLD) reported Q2 EPS of ($1.16), $1.32 better than the analyst estimate of ($2.48). Revenue for the quarter came in at $4.4 billion compared with $5.7 billion in the prior year quarter and the consensus estimate of $4.2 billion.

Edward S. Lampert, Chairman and Chief Executive Officer of Sears Holdings, said, "We are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our Company to profitability. The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance. While the third quarter has historically been our most difficult quarter over the past several years, we are working towards making meaningful improvement in our performance this year as a result of the restructuring actions we have put in place, and our continued focus on the expansion of our Shop Your Way ecosystem."

Rob Riecker, Holdings' Chief Financial Officer, said, "During the quarter, we continued to focus on actions to provide the Company with additional financial flexibility to generate liquidity and demonstrate our ability to manage our business while meeting all of our financial obligations."

Strategic Actions

In July, the Company announced our agreement with Amazon to launch Kenmore products on Amazon.com, which we expect will significantly expand the reach of the Kenmore brand. We expect this partnership to drive growth opportunities across three of our divisions - Kenmore, Sears Home Services and Innovel Solutions, Inc. ("Innovel"). Innovel and Sears Home Services will provide white-glove service for delivery, installation and extended product protection for the full range of home appliances from Kenmore sold on Amazon.com. The Amazon Kenmore Store will feature a full range of Kenmore products for purchase across the United States, with select home appliances already available in California.

We continue to explore opportunities for our Kenmore® and DieHard® brands, as well as our Sears Home Services and Sears Auto Center businesses by evaluating potential partnerships or other transactions that could expand distribution of our brands and service offerings to realize significant growth. There can be no assurance that we will complete one or more transactions, and we also intend to take actions on our own that present the opportunity to improve the economics of these brands and business, including potential externalization through non-Sears Holdings channels.

We have also continued to achieve significant progress in our restructuring program announced earlier this year, with over $1.0 billion in annualized cost savings actioned to date. Actions taken to date to realize $1.25 billion in annualized cost savings have included simplification of the organizational structure of Sears Holdings, streamlining of operations, reducing unprofitable categories and the closure of under-performing stores. In fiscal year 2017, we have closed approximately 180 stores previously announced for closure, and an additional 150 stores previously announced for closure are expected to be closed by the end of the third quarter of 2017. In addition, later this morning we will be notifying associates at 28 Kmart stores that we will be closing these stores later this year, as we continue to transform our business model so that our physical store footprint and our digital capabilities match the needs and preferences of our members; a list of these stores will be posted in the "News/Media" section of searsholdings.com (http://searsholdings.com/media/company-statements) by mid-day. As a result of these actions, the Company has begun to see improvement in the operations in the second quarter as noted above, particularly in the months of June and July as the restructuring program actions, including the closing of unprofitable stores, have begun to take effect.

Finally, in August 2017, the Company reached an agreement with Metropolitan Life Insurance Company ("MLIC") to annuitize an additional $512 million of its pension liability, under which MLIC will pay future pension benefit payments to approximately 20,000 retirees. This action is expected to have an immaterial impact on the funded status of our total pension obligations, but will serve to further reduce the size of the Company's combined pension plan, reduce future cost volatility, and reduce future plan administrative expenses.

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

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