Since Sears, Roebuck and Co. was purchased by Kmart making Sears Holding Corporation, the company reported a net loss for the first quarter of the year.
The merger was completed on March 24, 2005. Sears Holdings (“Holdings”) is the nation’s third largest broadline retailer with approximately 2,300 full-line and 1,200 specialty retail stores in the United States operating through Kmart and Sears and 340 full-line and specialty stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 54%-owned subsidiary.
According to the company’s financial report, Holdings ended the first quarter with $1.6 billion of cash and cash equivalents. Before the merger, Kmart and Sears had approximately $7.4 billion of cash and cash equivalents in aggregate.
The decrease in cash reflects the $5.4 billion paid to former Sears shareholders and option holders in connection with the merger and the repayment of $346 million of commercial paper borrowings. In addition to the $1.6 billion of cash on hand, Holdings has access to a $4 billion credit facility that is secured by domestic inventory and credit card accounts receivable. AP writes:
In the three-month period ended April 30, Sears lost $9 million, or 7 cents a share, on revenue of $7.6 billion. The results include a $90 million charge related to a change the company made in how it accounts for certain inventory costs. Without the accounting change, the company reported a profit of $81 million, or 65 cents per share. A year ago, the company reported a first-quarter profit of $91 million, or 94 cents per share.
The results included Kmart’s full performance for the 13-week period but included only five weeks of results from Sears stores after the $12.3 billion merger.
“The company therefore believes the results of operations are not representative of the ongoing results for Holdings,” said Sears in a statement.
Holdings’ inventory level at April 30, 2005 was approximately $9.5 billion, an increase of $6.1 billion over the prior year as a result of the merger. The current year inventory balance includes a purchase accounting step up adjustment of $48 million on Sears inventory above its FIFO value. As of the prior year period, the combined inventory on a FIFO basis of Sears and Kmart was approximately $9.7 billion. The merchandise payable balance is $3.7 billion at April 30, 2005 as compared to $3.9 billion for Sears and Kmart combined as of April 28, 2004.
During the first quarter of 2005, Holdings spent $66 million on capital expenditures as compared to $55 million and $88 million spent by Kmart and Sears, respectively, during the same 13-week period in the prior year. The current year spending of $66 million excludes about $40 million of capital expenditures made by Sears during the pre-merger period.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
