Executive Summary

• Sears reported 4Q15 revenues of $7.3 billion, down 9.8% year over year and beating the consensus estimate by about $50 million. Adjusted EPS, excluding significant items, was $(1.70), ahead of the $(2.62) consensus estimate, compared to $(0.34) a year ago.
• Comps declined by 7.1%, based on a decline of 7.2% for Kmart and 6.9% for Sears Domestic. Although comps improved in 4Q versus the prior three quarters, the unseasonably warm weather and promotional environment brought higher markdowns and hurt margins.
• In 2016, management aims to accelerate the company’s transformation and improve gross margin in order to return to profitability and generate positive adjusted EBITDA.