Sears Canada says Q2 was a 'turning point,' slide in store sales halted in June

TORONTO – Sears Canada’s second-quarter revenue was down 9.1 per cent from the comparable period last year but the company says its core retail network showed positive sales momentum and the sale of some properties helped produce a profit.

For the second quarter ended Aug. 1, Sear Canada’s revenue was $768.8 million and net income was $13.5 million or 13 cents per share. Included in the profit was a $67.2-million gain, before taxes, from the sale and leaseback of three properties.

In the comparable period last year, Sears Canada had a loss of $21.3 million or 21 cents per share with $844.4 million for the quarter ended Aug. 2, 2014.

The struggling retailer says it had a “turning point” in the month of June when its core retail network grew sales compared with last year, but added that the company’s overall cost structure is too high.

“Although we have had significant cost reductions in the past two years, we still have an inefficient cost structure.”

Sears Canada Inc. (TSX:SCC) says it plans to bring down annual operating expenses by $100 million to $125 million compared with 2014 levels, and to implement cost reduction initiatives in the current quarter that began Aug. 2.

The company’s press release didn’t provide details on where it expects to make cost savings.

It announced it has reached agreements to “monetize” an additional $28 million of non-mall real estate but said that “at the current time, we do not have any plans to sell or exit any of our full-line stores.”

The core retail store network consists of Sears Canada’s 95 full-line stores and 45 Sears Canada Home stores, and excludes Outlet and Hometown stores.

Sears Canada says it has 177 Hometown stores, over 1,200 catalogue and online merchandise pick-up locations, 84 Sears Travel offices and a nationwide repair and service network in addition to its corporate stores.

Sears Canada said it may be able to operate more profitably within smaller individual store sizes. It also said it will open a wave of branded shops within its stores by November under agreements with 12 vendors, including Haggar and Dockers.

Overall same-store sales, including non-core locations, fell 3.9 per cent for the quarter. But same-store sales at its core retail network were down just one per cent for the quarter and positive in the months of June and August.

The company said it’s continuing to search for a new chief executive to replace Ronald Boire, who announced in July that he was leaving to become president and CEO of the Barnes & Noble chain of bookstores in the United States, effective Sept. 8.

Boire became CEO of Sears Canada ilast fall. He followed Douglas Campbell, who left in September 2014, and Calvin McDonald, who quit suddenly in September 2013 in the midst of a multiyear turnaround plan.