Iconic department store chain Sears Holdings (NASDAQ:SHLD) reported earnings for its fourth quarter ending Jan. 31 on Wednesday after the market closed.
The company reported an adjusted profit of $1.12 per share against analysts expectations of a profit of 98 cents per share. Revenue came in at $12.26 billion, outpacing the expectation of $11.77 billion. Shares of Sears traded higher in the pre-market on Thursday, but the stock did not gain any momentum when regular trading commenced and the stock finished the day down just over 5%.
What is going on with the once-proud retailing legend?
The market is taking the Sears results with a grain of salt. Sales, though beating estimates, were lower than the prior year, and analysts say Sears has been manipulating results with cost-cutting and asset selling versus showing sales growth from operations.
The jury is still out on Sears, but this is no JCPenney (NYSE:JCP). That department store shedding nearly 20% of its value on Thursday thanks to a massive loss. Management at JCPenney has completely blown the opportunity to build on a discount revival by abandoning once-popular sales. The new everyday pricing is a disaster.
Sears on the other hand is an asset play. The company has much room to withstand changes in the industry and over time is likely to survive. In previous quarters we have seen selling in the stock replaced by some fervent buying. That is likely to be the case here. There is a trading opportunity with Sears over the next few months. Use the selling to open a position that you can ride right up to the next earnings report. Consider Call options for more aggressive traders.