OREANDA-NEWS. Sears Holdings Corporation (NASDAQ: SHLD) today announced financial results for its first quarter ended May 2, 2015. As a supplement to this announcement, a presentation, pre-recorded conference and audio webcast are available at our website http://searsholdings.com/invest.

In summary, we reported:

  • Domestic Adjusted EBITDA of \$(141) million in the first quarter of 2015 compared to \$(178) million in the prior year first quarter, which is the third consecutive quarter of improved EBITDA performance on a year-over-year basis;
  • Net loss attributable to Sears Holdings' shareholders of \$303 million (\$2.85 loss per diluted share) for the first quarter of 2015 compared to a loss of \$402 million (\$3.79 loss per diluted share) for the prior year first quarter;
  • Sales to Shop Your Way® members in Sears Full-line and Kmart stores were 74% of eligible sales for the first quarter;
  • Kmart and Sears Domestic comparable store sales declined 7.0% and 14.5%, respectively, in the first quarter of 2015 driven by more efficient and targeted promotional and marketing spend, and a focus on sizing certain categories, such as consumer electronics, to better fit member needs, that together generated higher margins and increased profitability year-over-year; revenues were also impacted by port issues on the West Coast;
  • Kmart's gross margin rate for the first quarter improved 150 basis points over the prior year first quarter, while Sears Domestic's gross margin rate improved 350 basis points;
  • The Company continues to demonstrate that it has the financial flexibility to fund its transformation and meet its obligations. As of May 2, 2015, we had approximately \$726 million in availability under our credit facility and \$286 million in cash prior to the impact of the announced REIT transaction which, assuming it successfully closed as of the end of the first quarter, would have resulted in pro forma cash on hand of \$2.3 billion and availability under our credit facility of \$1.1 billion; and
  • We continue to make progress towards the formation of Seritage Growth Properties, a public real estate investment trust or REIT, and its subsequent purchase of properties from the Company. We expect that we will be declared effective by the SEC this week, and are targeting to launch the rights offering on Friday, June 12, 2015. The transaction will involve the sale and leaseback of approximately 235 Sears and Kmart stores, as well as the purchase of our interest in the joint ventures, with expected proceeds to Sears Holdings of \$2.6 billion. This, when combined with the proceeds from the previously announced joint venture transactions, will result in proceeds in excess of \$3.0 billion.

Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer, said, "During the first quarter, we made significant progress in our transformation from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging our Shop Your Way platform. As our improved EBITDA results over the last three consecutive quarters demonstrate, we are successfully enhancing our margin rates and EBITDA performance as we become more efficient with our promotional programs and the use of Shop You Way to replace more traditional forms of marketing with targeted and personalized digital interactions." Mr. Lampert continued, "With the completion of the joint venture transactions with three leading shopping mall owners and operators, and the advanced formation of the Seritage REIT, we will become more productive with our physical store space. This will position Sears Holdings for long-term success consistent with our focus on our best stores, rewarding our best members and pursuing our best categories to transform Sears Holdings into a leading integrated retail membership-focused company leveraging our Shop Your Way platform."

Rob Schriesheim, Sears Holdings' Chief Financial Officer, said, "In the first quarter of 2015, we continued to unlock the value of our assets, enhance shareholder value, and improved quarterly EBITDA performance on a year-over-year basis for three consecutive quarters. Sears Holdings has consistently demonstrated its ability to both meet all of our short-term liquidity needs and fund the long-term transformation of the Company. We continue to make progress towards the formation of Seritage Growth Properties, a public real estate investment trust or REIT, and its subsequent purchase of properties from the Company. We expect that we will be declared effective by the SEC this week, and are targeting to launch the rights offering on Friday, June 12, 2015, which, if successful, will result in \$2.6 billion in cash proceeds to Sears Holdings. When combined with the previously announced joint ventures, this will total \$3.0 billion in cash realized. We expect to utilize a portion of the proceeds from the REIT transaction to pay down our existing revolver borrowings. Had the REIT transaction closed in the first quarter, we would have had cash balances of \$2.3 billion and availability under our credit facility of over \$1.1 billion."

Mr. Schriesheim added, "Consistent with our prior comments on enhancing our flexibility with our capital structure, we have reached agreement with three of our leading ABL lenders, representing \$1.175 billion of commitments, on terms pursuant to which they would be willing to amend and extend, to 2020, our \$3.275 billion revolving credit facility, currently expiring in April of 2016. We have already initiated discussions with our broader lender group and, if successful, expect to close the refinancing during our second quarter with an extended facility of approximately \$2.0 billion maturing in 2020 and the remaining \$1.275 billion of the existing ABL in place until April of 2016. Should both the REIT transaction and the amendment and extension of our ABL facility be successful, we will have enhanced our financial flexibility, recapitalized our balance sheet and secured a solid financial foundation to accelerate the investment in our transformation."