Sears Shares Rise on Solid Results

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Sears Holdings Corp. (NASDAQ: SHLD) reported fourth-quarter and fiscal year 2012 results before markets opened this morning.

The department store operator reported quarterly adjusted diluted earnings per share (EPS) of $1.12 on revenues of $12.3 billion. In the same period a year ago, Sears reported EPS of $0.54 on revenue of $12.5 billion. This morning’s results also compare to the Thomson Reuters consensus estimates for EPS of $0.98 and $11.77 billion in revenue.

On a GAAP basis, the company posted a quarterly net loss of $4.61 per share, compared with a net loss of $22.63 per share in the fourth quarter of 2011.

For the full year, Sears posted an adjusted EPS loss of $2.03 on revenues of $39.85 billion compared with a full-year 2011 loss of $4.52 per share. On a GAAP basis, the 2012 EPS loss totaled $8.78, compared with a loss of $29.40 on revenues of $41.57 billion in 2011. The consensus 2012 estimate called for a loss of $2.28 on revenues of $39.66 billion.

The company’s chairman and CEO, Eddie Lampert, wrote a letter to shareholders in which he denies that Sears’ problems come from underinvesting in the company’s stores. He notes:

In reality, and as I have discussed in prior shareholder letters, the progression of the Internet and mobile technology is fundamentally reshaping many industries, with retail being one of the largest. Increased price transparency, better customer-level information and analytics, faster supply chains and the advent of social networking and social media are all contributing to making running a large retail organization more complex.

There has been a significant amount of turnover at the highest levels of retail leadership and it only seems to be increasing. Changes at the CEO or President level of Safeway, Toys “R” Us, Staples, JCPenney, Best Buy and others are signs that the talent needed to transform companies in the retail industry today and the persistence required to see transformations through are not easy to come by. I believe that we are seeing an enormous shift in the type of talent that will be running retail enterprises in the future, similar to the shift that Google brought to the advertising business and that quants brought to financial services.

Whether or not Lampert counts himself as one of the new breed of retail CEOs isn’t clear, but pointing to J.C. Penney Co. Inc. (NYSE: JCP) and Best Buy Co. Inc. (NYSE: BBY) as examples of new talent with different skills probably is not encouraging to investors. J.C. Penney last night reported an adjusted EPS loss of $1.95 for its fourth quarter, and the company is setting plans to return to its prior practice of scheduling sales.

Sears did not offer guidance, nor is there a consensus EPS estimate. A consensus revenue estimate is $8.9 billion. For the full year, the consensus estimate calls for an EPS loss of $3.14 on revenues of $36.03 billion.

Sears’ shares are up 3.2% in premarket trading this morning, at $49.00 in a 52-week range of $38.40 to $85.90. Thomson Reuters had a consensus analyst price target of around $17.33 before today’s results were announced. Analysts clearly are not paying attention to Sears any more.

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