Cheering Otherwise Bad News At Sears (SHLD)

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Sears Holdings Corporation (NASDAQ: SHLD) beat earnings on the surface, but this is before huge charges.  The retail giant of Sears and KMart posted $2.94 EPS vs. $2.68 estimates, but revenues were down 11.9% to $13.28 billion vs. $13.99 billion estimates.  Where this gets interesting is in the individual metrics.

The company’s net earnings were $1.55 EPS after $336 million in charges. Domestic comparable store sales were down 8.3% and the company will take an extra $160 to $175 million charge related to the company’s pension because of market declines.  The company has also identified 24 stores it plans to close.

Sears has also been deleveraging its books.  It reduced the total short-term borrowings on its $4 billion revolving credit facility from $1.9 billion at November 1, 2008 to $435 million as of January 31, 2009.  Eddie Lampert also repurchased some 2.9 million shares for right at $120 million and repurchased debt securities for $29 million.  These helped to take down the cash balances to roughly $1.3 billion from $1.6 billion a year ago, although the company’s total debt was listed as $2.9 billion rather than $3.0 billion a year ago.

Here is where this gets interesting though.  Sears has proven in 2007 and most of 2008 to have metrics that were much worse than most of its competitors.  But when you start digging through the numbers on a comparable basis, it really looks like Sears overall business held up better than at many peers.  That wasn’t true on the big box level, but compared to the department store numbers it is true.  Sometimes bad news can be viewed as good news.  In today’s market, it is all relative.

It is too early to have any real trading indications.  Shares closed Wednesday at $35.83, and the 52-week trading range is $26.80 to $112.80.

Jon C. Ogg
February 26, 2009