Sears Posts First Profit Since 2012, Beats Street

Hoffman Estates, Ill.-based Sears Holding Corp. is back in the profit-making game, posting $208 million in earnings in the second quarter, ending Aug. 1, compared to losses last year.

While the firm — which operates in two segments: Kmart and Sears Domestic — beat Wall Street’s forecasts for the quarter, it’s revenues declined by nearly $2 billion.

Those sales declines along with mounting global economic uncertainty, namely in China, may have offset any uptick in investor sentiment as the firm’s stock remains in the red, down more than 2.5 percent in afternoon trading (2:48 p.m. EDT).

“We made good progress this quarter on our three key areas of focus: restoring profitability to our company, funding our transformation, and transforming into a member-focused company,” said Robert Schriesheim, Sears Holdings’ CFO and EVP, during the Q2 conference call. “We have delivered four consecutive quarters of improved domestic adjusted EBITDA performance year-over-year by enhancing our gross margin rate and reducing our expenses in a focused manner. While our financial results have improved, we still have much work to do to deliver performance that generates an acceptable level of return for our shareholders.”

Net Income: Net income attributable to Sears Holdings’ shareholders totaled $208 million for the second quarter of 2015 compared to a net loss of $573 million for the prior year’s second quarter.

EPS: Earnings per diluted share were $1.84 compared to losses per diluted share of $5.39 in the comparable quarter.

Net Revenue: Sears Holdings’ revenues decreased to $6.2 billion compared to the year-ago same quarter when revenues were $8 billion. The company said a significant portion of the decline was related to actions it took in 2014 to streamline operations and focus on its “transformation” into a “member-centric” retailer.

Adjustments: Adjusted for significant items, Sears Holdings would have reported a net loss of $256 million, or $2.40 loss per diluted share, compared to a net loss of $293 million, or $2.76 loss per diluted share, in the prior year quarter.

Hit, Miss or Beat: The company beat Wall Street’s estimates for both revenues and diluted EPS. Analysts polled by Yahoo Finance had predicted revenues of $5.7 billion and loss per diluted share of $2.50.

Executive Insights: “We have taken actions to generate substantial amounts of liquidity and provide our company with longer-term financial flexibility in a way that not only allows us to continue to operate our stores, but also is structured to accelerate the right-sizing of our store space. We have recapitalized our balance sheet, enhanced our financial flexibility and put in place a solid financial foundation, which will allow us to accelerate investments in our transformation while meeting all of our financial obligations.” – Schriesheim, during Q2 conference call.

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