Sears Holdings Corp (NASDAQ:SHLD)
Sears Holdings Corp (NASDAQ:SHLD) was a big market mover after posting its first profit since 2015, helping fuel optimism about the impact of an ongoing turnaround effort. For the first three months of the year, the retailer says it generated a net income of $244 million compared to a net loss of $471 million a year earlier.
Cost Cuts Impact
Net profit in the first quarter comes on the heels of a cost-cutting push that has seen Sears Holdings Corp (NASDAQ:SHLD) spin off some assets as it sought to raise cash to stay afloat. However, the fact that the company’s core Kmart department stores continue to struggle, remains a point of concern for investors.
“During the first quarter, we took decisive actions to reduce our cost base and drive operational efficiencies which allowed us to make significant progress on our restructuring program. We also remained focused on increasing our financial flexibility and creating value from our asset base to ensure we continue to meet our financial obligations and fund our transformation,” said chief executive officer, Rob Riecker.
Sales & Cash Decline
Revenues in the first quarter totaled $4.3 billion compared to revenues of $5.4 billion reported a year earlier. The company has attributed the decline to fewer Kmart and Sears Full-line stores in operation compared to last year.
Comparable store sales declined by 11.2%, Sears Holdings Corp (NASDAQ:SHLD) having experienced a decline in sales in its grocery, household, pharmacy, apparel, and home categories. The same led to a decline in gross margin that dropped by $247 million compared to last year.
Selling and administrative expenses decreased $236 million in the quarter compared to last year – a drop that the company attributes to improves operational efficiency and reduced costs.
Sears Holdings Corp (NASDAQ:SHLD) market rally came as investors took note of Lambert’s turnaround plan that seems to paying off. However, with a shrinking store base and less advertising the company remains in a precarious position as it tries to return to its glory years.
The company’s cash balance dropping to $264 million from $286 million as of the end of 2016 is also a point of concern. While the company still boasts $3.7 billion in total liquidity, some investors are already starting to question the company’s financial health given the rate at which it is burning cash.
Sears Holdings Corp (NASDAQ:SHLD) stock was up by 13.52% in Thursday’s trading session, ending the day at $8.48 a share.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.