Comps keep sliding at Sears and Kmart

HOFFMAN ESTATES, Ill. — Sears Holdings saw revenues decrease to $8.9 billion for the quarter ended August 3, from $9.5 billion for the year-ago quarter. Fewer Kmart and Sears full-line stores accounted for approximately $210 million of that decline.

Revenues were also affected by the separation of Sears Hometown and Outlet Stores (SHO), which occurred in the third quarter of 2012 and accounted for $195 million of the decline. Likewise affecting revenues were lower domestic comparable-store sales — which accounted for approximately $100 million of the decline — as well as a decrease of $13 million due to foreign currency exchange rates.

For the quarter, domestic comparable store sales declined 1.5%. Contributing to the same-store sales decline were dips of 2.1% at Kmart and 0.8% at Sears Domestic. The decline at Kmart reflects decreases in the company’s transactional categories, such as grocery and household, pharmacy and drugstore. It also includes declines in consumer electronics and toys. These decreases were partially offset by increases in the footwear and lawn and garden categories.

The comparable store sales decline at Sears Domestic was due to a decrease in the home appliance category, which was partially offset by increases in the lawn and garden, apparel and home categories. The Sears Domestic apparel category has actually achieved comparable store sales increases for eight consecutive quarters.

"We made meaningful progress this quarter in our transformation to a member-centric company. Shop Your Way members represented over 65% of our sales and they redeemed rewards points at a significantly higher rate than last year. While the increase in Shop Your Way promotional activity and member redemptions resulted in a meaningful increase in our costs, it demonstrates that our members are deepening their engagement with our program which will allow us to further accelerate our transformation," commented Eddie Lampert, Sears Holdings chairman and CEO. "At the same time, we recognize how important it is to improve the profitability of our company and I am disappointed that we did not deliver a better result."

For the quarter, the company’s gross margin decreased to $2.2 billion in 2013 due, in part, to the decline in sales. As compared to the prior year, Kmart's gross margin rate for the second quarter declined 100 basis points, as decreases in the footwear, seasonal and toys categories were only partially offset by an improvement in the apparel category.

Sears Domestic's gross margin rate declined 280 basis points for the quarter primarily due to selling merchandise to SHO at cost pursuant to the terms of the separation, which accounted for approximately 170 basis points of the decline. Sears Domestic also experienced decreases in the home appliances and automotive categories, which were only partially offset by an improvement in the apparel category.

Sears Holdings Corporation operates nearly 2,500 full-line and specialty retail stores in the United States and Canada and the home of Shop Your Way.