Sears to report first profit since 2012

HOFFMAN ESTATES, Ill. (AP) – Sears Holdings Corp. says a key sales figure fell sharply in the second quarter, particularly dragged down by weakness at its namesake stores.

“Either the brilliant turnaround plan for Sears isn’t working as well as anticipated, or it’s just taking a lot longer than shareholders would expect”, Consumerist commented. Kmart’s same-store sales fell 6.9% in the second quarter, while the Sears-branded chain of mall stores plunged 13.9% lower.

The only reason SHLD will be able to post any sort of second-quarter profit at all is by virtue of the sale of several of its stores to real estate investment trust Seritage Growth Properties (SRG).

The operator of Sears and Kmart stores said that sales at stores open at least a year dropped 10.6 percent for the quarter to date.

The bad news for owners of Sears stock, however, is that this profit isn’t built to last, as Sears’ retailing business continues to deteriorate.

“(Sears) is flush with cash, but we expect that balance to be used to fund $1 billion plus of operating losses annually.(Sears’) “shrink to win” strategy is unlikely to result in positive cash flow, and in our view, a liquidity event is a matter of when not if”, Melich said.

The company expected its net income in the range of around $155 million to $205 million or approximately $1.46 to $192 per diluted share including the gain and tax benefit, but excluding final accounting adjustments for the period. It is a minimum of the 10th straight quarter that the metric has declined. The typical K-Mart saw a 6.9% decline in year-over-year sales in the second quarter.

This follows a decrease of 11% during its first quarter, and was hurt by the consumer electronics segment of the company, which Sears said it was changing. The deal, completed in early July, transferred 235 stores to the newly developed REIT, for proceeds of about $2.7 billion.

Now what: Sears also disclosed some financial retooling and an amended credit facility, and outlined some progress on the company’s transformation into a membership-driven shopping club.