Sears, Walmart Turnarounds?

Neither Sears Holdings Corp. (NASDAQ: SHLD) nor Wal-Mart Stores Inc. (NYSE: WMT) was expected to post big numbers for the quarter just ended. And they didn’t — but the numbers were better than expected.

Lightly followed Sears reported an adjusted EPS loss of -$0.31 for its first quarter, less than half the consensus (three analysts) estimate of an EPS loss of -$0.67. Revenue came in at $9.3 billion, compared with an estimate of $9.15 billion. On a GAAP basis, Sears posted EPS of $1.78.

The gains at Sears are almost entirely due to the dismantling of the company. The company sold $440 million worth of US and Canada leases during the quarter, and is continuing with its plan to spin-off the Outlet and Hometown stores in the third quarter for another gain of $400-$500 million. Sears also closed stores and is planning to spin-off to existing shareholders about 44% of its holdings in Sears Canada, leaving Sears Holdings with a 51% ownership share.

Walmart, far from dismantling itself, touts its 20% growth in operating income from its international operations. That includes its stores in Mexico — ahem. Walmart posted EPS of $1.09 versus an estimate of $1.04, and revenue of $112.3 billion versus a consensus estimate of $110.5 billion. On a constant currency basis, revenue totaled $111.2 billion. Currency transactions cost the company $800 million in the quarter. Walmart guided EPS for its second quarter at $1.13-$1.18, where the consensus had been $1.16.

At Walmart’s US division, operating income rose by 8.1% “due primarily to higher sales, aided by our price investment strategy, our continued focus on productivity and expense management. Walmart U.S. leveraged expenses for the quarter.” Walmart’s short-term borrowing at the end of the quarter totaled $5.8 billion, up from $4.05 billion in the first quarter and much higher than the $3.45 billion in short-term loans in the same period a year ago. The company plans to continue to “leverage expenses” in the coming quarter.

When Target Corp. (NYSE: TGT) reported earnings yesterday it, too, showed a nice gain but the stock price rose less than 1%. J.C. Penney Company Inc. (NYSE: JCP) got slaughtered yesterday for missing estimates, and Home Depot Inc. (NYSE: HD) took its lumps on Monday.

For different reasons, both Sears and Walmart expect to get a share price boost today. No such luck for Dollar Tree Inc. (NASDAQ: DLTR) which met both EPS and revenue forecasts, but guidance for the second quarter came up short, with EPS guided to $0.87-$0.93, below the consensus estimate of $0.95. Another super-discounter, Dollar General Corp. (NYSE: DG) is expected to post EPS of $0.60 on revenue of $3.82 billion when it reports results for its quarter ended in April.

Shares of Sears are up 7.6% in the pre-market this morning, at $54.75 in a 52-week range of $28.89-$85.90. Shares of Walmart are up about 3.5%, at $61.24 in a 52-week range of $48.31-$62.63. Dollar Tree’s shares are getting pummeled, down nearly -6% at $95.30 in a 52-week range of $59.90-$104.08.

Paul Ausick