Sears Holdings (SHLD) Posts Narrower-than-Expected Q2 Loss

Sears Holdings (NASDAQ: SHLD) reported Q2 EPS of ($2.40), $0.10 better than the analyst estimate of ($2.50). Revenue for the quarter came in at $6.2 billion versus the consensus estimate of $5.72 billion.

Kmart and Sears Domestic comparable store sales declined 7.3% and 14.0%, respectively, in the second quarter of 2015 driven in part by highly targeted promotional and marketing spend to better align with member needs, and a shift away from low margin categories, such as consumer electronics.

Financial Position

The Company's cash balances were $1.8 billion at August 1, 2015 compared with $250 million at January 31, 2015.

Domestic merchandise inventories at August 1, 2015 were $5.0 billion, compared to $5.8 billion at August 2, 2014, with the decline being driven by improved productivity and store closures.

Since the first quarter of 2012, we have reduced our net inventory investment by approximately $2.2 billion. By reducing our inventory investment and our payables, we have decreased the level of vendor support needed to run our business, de-risking our business model in a way that benefits both us and our vendor partners.

Short-term borrowings totaled $6 million at the end of the second quarter of 2015 consisting of commercial paper outstanding, as compared to $615 million at January 31, 2015, consisting of $213 million outstanding on our domestic credit facility, a $400 million secured short-term loan and $2 million of commercial paper outstanding.

At August 1, 2015, the amount available to borrow under our credit facility was approximately $1.2 billion, which reflects the effect of our springing fixed charge coverage ratio covenant and the borrowing base limitation in our revolving credit facility.

Total long-term debt (long-term debt and capital lease obligations) was $3.1 billion and $3.2 billion at August 1, 2015 and January 31, 2015, respectively.

As of the "Early Tender Date" of August 17, 2015, approximately $936 million principal amount of the Notes were validly tendered and not validly withdrawn in the Offer. Pursuant to the terms of the Offer, holders of Notes may tender additional Notes at or prior to 11:59 p.m., New York City time, on August 28, 2015, unless the Offer is earlier terminated or extended by the Company in its sole discretion. As such, the unused balance of our debt repurchase authorization is $74 million at August 20, 2015. As a result of the Notes received as of the Early Tender Date, we have mitigated our annualized cash interest expense by approximately $62 million. The Company may consider repurchasing other outstanding debt securities in order to further mitigate our interest expense.

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

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