Sears Holdings (SHLD) Slides on Dismal First Quarter Earnings
Shares of Sears Holdings (SHLD) slid last week, after the company reported first quarter earnings that simply reinforced what investors had come to expect from the troubled retailer - declining top line, bottom line and same-store sales growth. For its first quarter, Sears reported a net loss of $2.63 per share, or $279 million, a frightening plunge from the profit of $1.78 per share, or $189 million, it reported in the prior year quarter.
Meanwhile, revenue slid 9% to $8.5 billion. Thomson Reuters analysts had expected Sears to report a smaller loss of $0.60 per share on revenue of $8.74 billion. The results were so dismal that a commentator on CNBC remarked, "Sears exists to make J.C. Penney (JCP
) look good." Sears stock plunged nearly 14% on May 24 as a result. Daily Chart
Sears and J.C. Penney actually share some similar characteristics - abrupt leadership changes, an uncertain path for future growth, endless same-store sales declines, and a meager cash flow. For the quarter, Sears reported a year-on-year same-store sales decline of 3.6%, an expected continuation of seven straight years of same-store sales declines. Sears, just like its discount superstore rivals Target (TGT
) and Wal-Mart (WMT
), blamed an unseasonably cool spring for its lack of sales growth. Sears claimed that demand for spring apparel, patio furniture and other outdoor products declined as a result. Yet Sears' reasons mask a more troubling problem - under Eddie Lampert, the company has gotten into a habit of selling assets to stay afloat. Over the past few years, Sears has continuously sold of real estate, closed stores (including most of its Kmart locations), used tighter inventory controls, and cut staff to stay afloat. Sears is also getting crushed on the high-end, low-end and e-commerce fronts, by large department stores like Macy's (M
), superstores such as Wal-Mart, and of course e-commerce titans Amazon (AMZN
) and eBay (EBAY
). In other words, there's no room left in this saturated market for Sears' jarring, non-cohesive offerings of discount clothing, home appliances and electronics. Worst of all, Sears' plan for the future is to simply follow its current plan of burning the furniture to stay warm. The company intends to sell its protection agreement unit, reduce expenses by $200 million, and possibly sell of other assets to generate $500 million more in liquidity. That's it. There's no aggressive plans to update its stores to optimize them for 21st century shoppers, and no turnaround plan to reverse its same-stores sales declines so it can become a relevant name in retail once again. Simply put, Sears Holdings has become a zombie retailer. Other News About SHLD Sears Losses Mount, Weighs Sale of Unit to Shore Up Liquidity
Sears disappoints investors once again. Sears Posts Loss, Blames Cool Spring
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Published on May 28, 2013
By Leo Sun