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Sears narrows loss but sales tumble for 24th straight quarter

Sears Holdings Corp. reduced its third quarter loss by $190 million helped by lower operating costs from its reduced store portfolio, but it saw no improvement on the revenue side as same-store sales plunged 15.3%.

Sears reported a net loss of $558 million ($5.19 loss per diluted share) for the quarter ended Oct. 28, compared to a net loss of $748 million ($6.99 loss per diluted share) in the year-ago period.

Revenue fell 27% to $3.66 billion, with store closures contributing to over half of the decline, the company said. Revenues were also negatively impacted by reductions in the number of pharmacies in open Kmart stores, and the reduction in consumer electronics assortments in both Kmart and Sears stores.

Same-store sales declined 15.3% during the quarter. Kmart comparable sales decreased 13.0%, while Sears comparable store sales declined 17.0%.

Neil Saunders, managing director, GlobalData Retail, said he saw nothing to celebrate in Sears' third quarter performance despite the improvements in its bottom line.

"Much has been made of the improvement to the bottom line," Saunders commented. "In our view, these warm words -- a bromide which has been trotted out at every results announcement for years -- do not stack up against reality. It is true that losses have narrowed, but Sears was still in the red by well over half a billion dollars during the quarter."

Saunders said he saw no chance of Sears' sales losses leveling off anytime soon.

"The dramatic loss of customers at existing stores continues apace, and we believe that there is a danger this trend could accelerate into the new year," he said.

Adjusted EBITDA improved $100 million to $275 million in quarter of 2017, from $375 million in the prior year third quarter. It was the second consecutive quarter of at least $100 million improvement in adjusted EBITDA as the restructuring actions taken in the first three quarters of 2017 have resulted in meaningful year-over-year improvement, Sears said.

Going forward, Sears said it will continue to maintain "extreme cost discipline," and continue to diversify revenue streams through third party partnerships in several of its businesses including Sears Home Services, Innovel, Kenmore and DieHard. It also plans to build on the "momentum" around its dedicated concept format, such its Sears Appliances and Mattress stores.

Sears' third quarter results were in line with its earlier forecast released in October. In that release, the retailer said it had entered into a deal with the Pension Benefit Guaranty Corp. over its pension obligations, clearing the way for the company to sell 138 additional properties. "Once complete, the estimated contributions of $550 million to the pension plans in 2018 and 2019 is eliminated (with the exception of a $20 million payment in July of 2018)," Sears CFO Rob Riecker stated Thursday. "Additionally we will be taking action in the near term with respect to certain upcoming debt maturities to provide the company with further financial flexibility and enhanced liquidity."

In a statement, Sears Holdings chairman and CEO Edward Lampert focused on the company's positive developments.

"In the third quarter, we continued to narrow our losses and delivered another quarter of adjusted EBITDA improvement of at least $100 million," said Sears Holdings chairman and CEO Edward Lampert. "With the challenging retail landscape continuing to pressure sales, the improvement in adjusted EBITDA is reflective of the success of the strategic priorities we outlined earlier this year to streamline our operations, reduce inventory and minimize operating expenses, as well as our commitment to our goal of restoring positive adjusted EBITDA in 2018."
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