Sears Revenues to Hit Zero in 3 Years. But Bankruptcy First


by Wolf Richter, Wolf Street:

This baby is going down the tubes at an ever faster speed.

Sears Holdings, after warning in March that “substantial doubt exists” about its ability to continue operating as a “going concern,” rubbed salt in those doubts in its second-quarter earnings report.

Quarterly revenue plunged 23{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} year-over-year to $4.37 billion.

It says $770 million of that $1.33-billion plunge was a result of the endless series of store closings with which Sears is trying to keep itself out of bankruptcy for as long as possible.

In its fiscal year 2017, it already closed about 180 stores and expects to shutter an additional 150 stores in the third quarter. Those closings had been announced previously. But in its earnings release, it announced the closing of 28 more Kmart stores “later this year.” Liquidation sales will begin as early as August 31, it said.

The rest of the plunge was caused by same-store sales (sales at stores open longer than one year) which dropped 11.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. “Softness in store traffic” the company called it. But the trend is falling off a cliff: In Q2 2016, same-store sales had dropped “only” 5.2{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Now they’re plunging at more than double that rate. Despite the ceaseless corporate rhetoric of operational improvements, this baby is going down the tubes at an ever faster speed.

How does that $4.37 billion in revenues stack up? They’re down by nearly two-thirds from Q2 2007. This is what the accelerating revenue shrinkage looks like:

In the press release, Sears CEO and hedge-fund owner Eddie Lampert made another bad joke at shareholder expense, when he was quoted as saying:

“We are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our Company to profitability. The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance.”

So let’s see…

Over the past three years, the momentum of the revenue decline has accelerated sharply. Q2 revenues have plummeted from $8.0 billion in 2014 to $4.37 billion in 2017. A decline of $3.6 billion, or 45{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in three years. This chart shows Q2 revenues from 2014 to 2017, with the trend line (purple) extended until it hits zero. This is the same track that Q1 revenues are on. As I’d postulated three months ago, at this rate, revenues of the once largest retailer in the US will be zero in three years, or by 2020:

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