In the third quarter of 2009, Sears Holding Corporation narrowed its losses from $146 million in the previous quarter to $127 million. Despite this, shares of Searsâ€™ stock have almost doubled during 2009.
- The article mentioned that because of inventory management, the companyâ€™s gross margin widened by 0.4 percentage points to 27.2%. What are some of the things that were done? Explain how each of these examples you cited would affect the financial statements?
- The article mentioned that Sears cut $101 million of selling, general and administrative expenses. Where does this appear in the financial statements?
- One of the things that Sears has done to increase sales is to bring layaway back to its K-Mart stores. Explain how revenue recognition works in a layaway situation, where a deposit is required to hold merchandise at the store until it is fully paid for. Include journal entries, where possible, in your explanation example.
SOURCE: Cheng, A. â€œSears Loss Narrows As it Controls Inventory, Expenses,â€ Wall Street Journal â€“ Market Watch (Retrievable online at http://www.marketwatch.com/story/sears-loss-narrows-on-cost-controls-2009-11-19)