Finanzas: Sears Holdings: Adjusted EBITDA Continues To Decline In Q3 2016
Diciembre 27, 2016
Comparable store sales were down -7.4%, including -10% for Sears Domestic.
Sales would have probably been even worse without the apparent high level of markdowns and discounts.
Gross margin percentage declined significantly, resulting in an negative $375 million adjusted EBITDA number. This is worse than Q3 2015 despite heavy cost cutting.
Sears appears to be depending significantly on inventory conversion to cash as a source of liquidity.
With Sears’s massive rate of cash burn, it could need to close 40% of its stores to reduce inventory enough to cover the expected cash burn over the next year.
Sears Holdings (NASDAQ:SHLD) reported quarterly earnings that were again dismal. Sears’s topline results actually weren’t quite as bad as I thought they would be, and came in at the high end of my expectations. However, the decline in Sears’s gross margin dollars is significantly greater than the decline in its revenues, indicating that Sears may be preventing its sales numbers from being even worse only by selling merchandise at very low margins and heavy discounts.
Comparable Store Sales Continue To Fall
Comparable store sales continue to plummet, falling -7.4% in Q3 2016 for Sears Holdings as a whole. This comes against a weak Q3 2015 comp, which was already down -8.6% versus Q3 2014. The two year stacked comp for Sears Holdings is -15.4%. Sears Domestic’s two year stacked comp is particularly bad at -18.6%, while Kmart is at -11.6% for that measure.
It is a sign of how challenging things are for Sears Holdings that a two year stack comp of -15.4% was actually better than feared.
IssuesSears’s comparable store sales may have been prevented from falling even further by sacrificing some gross margin. It appears that Sears is selling products at ever decreasing margins. Kmart’s adjusted gross margin is down to 16.7% in Q3 2016 from 21.8% in Q3 2014, while Sears Domestic’s gross margin is down to 21.1% in Q3 2016, from 23.1% in Q3 2014. Adjusted gross margin excludes items such as amortization related to the Seritage transaction and store closure costs that affect gross margin.
Fuente: Seeking Alpha
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