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 Sears blames the weather for its sales decline. Other Stocks in the News Open Table Could Rise Above It All Will OpenTable's dominance of its niche market pave the way to bigger gains? Should Gunmakers Invest in Smart Guns? What's keeping U.S. gunmakers from investing in "smart gun" technology. Copyright 2013 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 May 28, 2013
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.

Copyrighted 2020. Content published with author's permission.

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