Tomahawk, WI 2/28/2014 (Basicsmedia) –  Rising SG&A and Margin declines: How Sears Holdings Corp (NASDAQ:SHLD) Will Pull Through

Shares of Sears Holdings Corp (NASDAQ:SHLD) rose by 6.46% by mid-day trading today  as the company released its Q4, and gull year 2013 financial results in eth early hours. The company has a liquidity worth of $6.5 billion about $1 billion in cash and another $885 billion in borrowed facilities. Convertible liquidity (inventory) was up to $6.5 billion with a turnover of 90 days.

Financial Highlights

Fourth quarter margins declined this year to $2.5 billion i.e. $681 billion below Q4, 2012. Ignoring the effect of closed stores the decline would be $512 billion. The decline in comparable store sales had a lesser impact as it caused only 38% of the total decline in margins. Looking at the Product category wise loss margins for both Sears Holdings Corp (NASDAQ:SHLD) and Kmart experienced decline across most categories so there were no particular loss leaders.

Business Model Improvements: the Silver Lining to A Cloudy Outlook

One positive point to note is that Sears Holdings Corp (NASDAQ:SHLD) has a scalable revenue base which continued to improve this year as its business model transforms to a new “Shop Your Way” model.

The new model is more reliant on variable promotional costs rather than on fixed adverts and marketing budgets. Fixed Promotional and SS&A costs are expected to come down after successful launch of the new model. According to the company’s claim each 100 base point improvement in the costs will add another $100 million to EBITDA. This is a huge promise for bottom line improvement in retail sector where SG&A is the biggest challenges. It is this very challenge that is pushing e-Commerec retailing giants like Amazon Inc (NASDAQ:AMZN) to switch away from core business or pivot to related Niches like payment solutions for extra liquidity.

Earlier this month Sears Holdings Corp (NASDAQ:SHLD) also announced grant of 7,198 restricted shares to Edward Lampart under its 2006 stock plan. Lampart’s holding combined with other institutional hedge funds raised over 48% of the company’s stock.

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