SHLD may look to refinance some debt, including its revolving credit facility, which comes due in April 2016, and it has $1B in senior secured notes that come due in Oct. 2018; it also could issue debt against its real estate, similar to what J.C. Penney did last year when it secured a $2.25B loan with mortgages on its property.
SHLD has raised $665M YTD, in part by spinning off Lands' End to shareholders; it plans to raise $1B this year and may sell its 51% stake in Sears Canada and its Sears Auto Center business.
Fitch analyst Monica Aggarwal expects Sears to need $2B in cash in 2014 to fund operations and cover pension, interest and other obligations, but she is not optimistic: "We don't see them having the levers to turn this business around."
Strong Xbox One/PS4 sales fueled a 124.8% Y/Y FQ2 increase in GameStop's (NYSE:GME) new hardware sales to $332.3M (19% of revenue), which in turn drove the company's big revenue beat. Comparable store sales rose 21.9%.
New software sales +15.6% Y/Y to $497M; pre-owned value game sales +5.5% to $558M; game accessories +17% to $107.5M; digital +6% to $52.3M; mobile/consumer electronics +85.1% to $112.1M.
A mix shift towards hardware led gross margin to fall 260 bps Y/Y to 31.8%. SG&A spend fell to 27.5% of revenue from 30.5%. $75.5M was spent on buybacks.
GameStop expects FQ3 EPS of $0.58-$0.64 (above a $0.57 consensus), with comp. sales growth of 1%-5%. FY14 EPS guidance of $3.40-$3.70 is being maintained for now (consensus is already up to $3.67); 6%-12% full-year comp. sales growth is expected.
Aeropostale (NYSE:ARO) -9.2% AH despite posting a narrower than expected Q2 loss, as the struggling teen apparel retailer issues downside guidance for Q3, sees a loss of $0.44-$0.48/share vs. analyst consensus for a $0.35 loss.
Q2 gross margin narrowed to 15.8% from 17.9%, but input costs fell 11% to $333M.
ARO had pre-announced some of its Q2 results earlier in the week while announcing the return of former CEO Julian Geiger to replace Thomas Johnson.
Guerra has had disagreements with LUX founder and chairman Leonardo Del Vecchio over the company's management, and speculation yesterday centered on a spat over the recent tie-up with Google.
Guerra is held in high regard by analysts; Luca Solca of BNP Paribas says "maybe Del Vecchio expected higher retail margins. I can't see any other flaw in Guerra's management, which followed pretty much the direction given by Del Vecchio."