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Sears revenues decline but narrows loss in Q4

By Prachi Singh

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Business |REPORT

Revenues at Sears Holdings decreased about 2.5 billion dollars to 8.1 billion dollars for the quarter ended January 31, 2015, as compared to revenues of 10.6 billion dollars for the quarter ended February 1, 2014. Revenues decreased approximately 5 billion dollars to 31.2 billion dollars for the year ended January 31, 2015, as compared to revenues of 36.2 billion dollars in the prior year. The company has attributed the fourth quarter and full year loss in revenues to Sears Canada, which was de-consolidated in October 2014, the separation of the Lands' End business, which was completed in the first quarter of 2014 and less revenue contribution from fewer Kmart and Sears full-line stores.

The Company reported a net loss of 159 million dollars for the fourth quarter of 2014 compared to 358 million dollars for the prior year period. The company reported a net loss of 1.7 billion dollars and 1.4 billion dollars for the full year of 2014 and 2013, respectively.

“We are pleased to report 125 million dollars in adjusted EBITDA in the fourth quarter, a significant improvement year over year," said Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer, adding, "We believe that the changes we are making to focus on our best stores, reward our best members and pursue our best categories will help us continue to transform Sears Holdings into a leading integrated membership-focused company."

At Kmart, apparel, toys, jewelry and seasonal categories were top performers, but were offset by declines in consumer electronics and grocery & household. Excluding the impact of the consumer electronics and grocery & household goods businesses, comparable store sales would have increased 2.8 percent. Sears Domestic was also negatively impacted by consumer electronics industry trends. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 4.6 percent, primarily driven by decreases in Sears Auto Centers and apparel.

For the year, domestic comparable store sales declined 1.8 percent, comprised of a decrease of 1.4 percent at Kmart and a decrease of 2.1 percent at Sears Domestic, which contributed to 421 million dollars of the decline. For the year, Kmart had positive performance in several categories, most notably apparel and jewelry, partially offset by declines in the consumer electronics and grocery & household categories. Excluding the impact of the consumer electronics and grocery & household goods businesses, comparable store sales would have increased 0.8 percent for the year.

Gross margin decreased 504 million dollars to 2 billion dollars in the fourth quarter of 2014, as compared to the prior year fourth quarter, as the above noted decline in sales was partially offset by an improvement in gross margin rate. Kmart's gross margin rate for the fourth quarter increased 170 basis points primarily driven by an increase in the apparel category due to lower promotional activity, as well as improvements in toys, grocery & household and drugstore. Sears Domestic's gross margin rate increased 120 basis points for the quarter with improvement experienced in a majority of categories, most notably home appliances and apparel.

For the year, gross margin decreased 1.6 billion dollars to 7.1 billion dollars in 2014, as compared to the prior year due to the above noted decline in sales, as well as a decline in gross margin rate. Kmart's gross margin rate for the year decreased 50 basis points primarily driven by decreases in home, consumer electronics and seasonal, which were partially offset by an improvement in the apparel category. Sears Domestic's gross margin rate decreased 140 basis points for the year primarily driven by decreases in apparel, tools, home and consumer electronics, partially offset by an improvement in mattresses.

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