Sears Holdings (SHLD) Slides After Missing 3Q Earnings Estimates

Last Friday, Sears Holdings (SHLD: Charts, News) became the latest retail giant to fall, following bleak earnings from J.C. Penney (JCP: Charts, News) and Wal-Mart (WMT: Charts, News). Sears posted a third quarter loss of $4.70 per share, or $498 million, down from a loss of $3.95 per share, or $421 million, a year earlier.

This was more than double the expected loss of $2.17 per share projected by analysts. Revenue slid 5.8% to $8.86 billion, which beat the analyst consensus of $8.59 billion. Daily Chart
Sears attributed its weak earnings to lower same-store sales, which declined 3.1% across the company, with a 1.6% decline at Sears and a 4.8% drop at Kmart. Sears' Canadian stores fared worse, posting a same-store sales decline of 5.7%, which Sears blamed on weak demand for snow throwers, home decor, and apparel for both men and women. Sears recently spun off a portion of its Sears Canada subsidiary, reducing its stake from 95% to 51% to reduce exposure to the Canadian market. Last December, Sears spun off its Orchard Supply Hardware stores. Sears also recently spun off its Hometown and Outlet businesses. Sears spun off these operations to slim down the company's operations, and also sold much of its real estate to reduce costs. The company said weakness was widespread across groceries, household items and consumer electronics, and that it was working on turning around its performance in those areas. Weak demand for consumer electronics was an unusually sore spot for Sears, which was helped in the past by strong demand for TVs, computers and home electronics. All-in-one devices such as smartphones and tablets have caused the price of portable electronics - such as MP3 players and cameras - to fall, which has eroded the company's margins. Gross margin contracted from 25.5% to 25.4%. However, operating expenses decreased by 5.8%, as a result of the company's ongoing asset sales. Sears also incurred an $11 million income-tax expenses during the third quarter, offsetting some gains from the $91 million tax benefit it received in the prior year quarter. Sears has attempted to turn around its retail operations for several years. The stock nearly traded at $200 per share in 2007 prior to the financial crisis, but plunged to $30 per share the following year. Shares have been slow to recover, despite staging a moderate comeback in early 2010. Sears has attempted to boost its sales by renovating stores and introducing loyalty programs. Sears has also sold several stores and closed over 100 in an effort to firm up same-store sales. CEO Louis D'Ambrosio took note of the company's lackluster efforts to catch up to its industry peers. "The retail industry continues to change dramatically and rapidly," D'Ambrosio stated. "It will never go back to what it was and we have seen the consequences for those that have not changed fast enough." Shares of Sears have declined 28% over the past year and 59% over the past five years. The stock has traded in a wide 52-week range between $28.89 and $85.90, with a comparatively high beta of 1.96. The company's P/E and PEG ratios are negative, and cannot be reliably referred to unless it returns to profitability. Sears Holdings does not a pay a quarterly dividend. Other News About SHLD Sears Same-Store Sales Fall as Demand For Electronic Goods Wane Shares of Sears slide as weak same-store sales lead to an earnings miss. Sears Holdings Corporation Completes Partial Spin-Off Of It sInterest In Sears Canada Inc. Sears spins off a large portion of its Canadian operations. Other Stocks in the News Apple Inc. Still Trying To Penetrate Chinese Market Is the Chinese market Apple's final frontier? Penn National Jumps on Breakup Plan to Create Casino REIT Will a casino REIT attract investors? Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Nov 19, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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