Sears Company Earnings: A Turnaround That Just Cannot Turn Around

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Sears might as well start working toward just give up on being a retailer. This is a decade-long turnaround that just cannot seem to turn around. Sears Holdings Corp. (NASDAQ: SHLD) reported that its company earnings came in at -$2.63 per share or -$279 million, and the loss a year ago was “only” $1.78 per share. While this may include some items, the retailer’s adjusted earnings comparison came in at -$1.29 per share, versus -$0.51 a year ago. Thomson Reuters had the consensus at -$0.60 per share

Revenue decreased by some $818 million to $8.45 billion for its first quarter. As a reminder, the Sears Hometown and Outlet business separations occurred in the third quarter of 2012. Sears showed that its gross margin rate decreased 220 basis points for the first quarter of 2013 and its domestic inventory was down by about $500 million.

Domestic comparable-store sales fell by 3.6% in the first quarter, composed of decreases of 4.6% at Kmart and 2.4% at Sears Domestic. The decline was in part blamed on cold weather, and we would note that other retailers have been discussing the lack of that 53rd week this year compared to last year. Sears had cash balances of $481 million as of May 4, 2013, versus $618 million in the prior sequential quarter.

The company said:

Excluding lawn & garden, comparable store sales would have increased 0.3%. This slight increase was due to increases in the apparel and home categories, which were partially offset by declines in the consumer electronics and tools categories. The Sears Domestic apparel category has achieved comparable store sales increases for seven consecutive quarters.

The issue here is that there always seems to be some reason that shareholders are disappointed or that sales miss expectations. We have a hard time believing that trust will last much longer here.

The only thing we can throw out there is that the short interest may be a wild card for Friday trading. Its short interest was down to 7.81 million shares, although this represents a days-to-cover ratio of more than 13 days. That being said, getting to the point that believing things will get better is getting very hard to do.

Sears shares closed down 0.3% at $58.17, and the stock is down more than 10% at $51.50 in the after-hours trading session. Its 52-week trading range is $38.40 to $68.77.