Sears’ Brutal Q2 Results

Some firms got the retail rally memo – some didn’t.

Sears didn’t.

The numbers were all pointing the wrong direction for Sears in Q2 — revenue fell 8.8 percent to $5.66 billion, and same store sales were down 7 percent at Sears stores and 3.3 percent at Kmart. CEO Eddie Lambert noted that Sears faces “a challenging competitive environment.”

Putting it mildly.

Apart from falling figures, Sears also announced it will receive $300 million of additional debt financing secured by a junior lien against inventory, receivables and other working capital. That loan comes care of Lampert’s ESL Investments, Inc. hedge fund.

There was some good news to report — Home Services, Kenmore appliances, Craftsman tools and DieHard vehicle batteries have all captured the interest of various retailers, investors and manufacturers. That leaves open the possibility that Sears could snag some quick capital by spinning off those brands.

But Sears’ fundamental problems —falling sales and mounting losses — are persistent, and at this point they look insuperable to outsiders.

Insiders are remaining optimistic — Sears Holdings CFO Rob Schriesheim alluded to the fact that the firm retains the ability to set the ship to right with the aid of the newly created REIT and its CEO’s hedge fund.

“During the first half of 2016, we have demonstrated our ability to finance our transformation strategy with the levers available to us through our portfolio of assets and businesses,” Schriesheim said in a statement.

But that transformation better start taking shape soon — Sears’ losses in Q2 rose to $395 million, or $3.70 a share. Profit was $208 million ($1.84 per share). And those kinds of figures look an awful lot like blood in the water as the holiday season looms large.

“I suspect the quarter from Sears will be so bad that people will voice concern on the company getting the inventory it needs to drive its business during the holiday season,” he wrote. “And if it doesn’t have the inventory during the most important quarter of the year, look for the market to reason the company could be headed for a financial tailspin sometime in 2017,” noted Brian Sozzi at TheStreet.