Sears Earnings Surprise Down to Store Closures, Craftsman Brand Sale

Sears Holdings Corp. (NASDAQ: SHLD) reported first-quarter 2017 results before markets opened on Thursday. The company posted diluted earnings per share (EPS) of $2.28 on revenues of $4.30 billion. In the same quarter a year ago, Sears posted a net loss of $4.41 on revenues of $5.39 billion. The consensus estimates called for a loss of $3.05 on revenues of $4.05 billion.

Adjusted to account for $741 million in asset and trademark sales among other one-time items, Sears posted a net loss per share of $2.15.

U.S. same-store sales fell 12.4% at Sears stores in the first quarter and 11.2% at Kmart stores. The declines in revenues and same-store sales are primarily due to the company’s full-line store closures.

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Edward S. Lampert, the company’s board chair and chief executive, said:

While this was certainly a challenging quarter for our Company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing. We recognize that we need to accelerate our efforts to improve our operational performance and are moving decisively with our $1.25 billion restructuring program.

Sears did not publish any guidance, but consensus estimates for the second quarter call for a loss of $3.01 per share on revenues of $4.37 billion. For the full year, analysts are looking for a loss of $12.58 per share on revenues of $17.25 billion.

Depending on one’s point of view, this report is a glass half full or half empty. Closing stores lowers costs and, presumably, eliminates the worst performers. That’s usually a good thing, but there are probably other poor performers still to go.

Selling off its Craftsman brand leaves the company with fewer valuable assets, not a good thing because Sears basically had no choice. The company still owns its Kenmore appliance and DieHard battery brands.

Shares traded up more than 11% in Thursday’s premarket session to $8.31, after closing down about 4% on Wednesday at $7.47 in a 52-week range of $5.50 to $18.18. The 12-month price target is $4.00 from just one analyst.

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