SHLD: Sears Earnings = Downright Awful
Last but not least, the Sears earnings report from this morning may have been the most discouraging of the three major retail turnaround efforts underway this year. The company’s revenue fell 6.6% to $8.27 billion. Net income (on a GAAP basis) fell from a loss of $4.70 per share in the same quarter a year earlier to a loss of $5.03 per share of SHLD stock in the third quarter of this year.
Sears earnings also showed a 3% drop in same-store sales.
As with JCPenney stock, the decision to become or remain a shareholder of SHLD stock is largely going to lie in how it handles its waning liquidity. Unlike JCP, however, Sears CEO Eddie Lampert is selling off revenue-bearing (and sometimes profitable) assets (stores) in order to remain liquid.
The maneuver is working too, and SHLD stock is actually up around 50% so far this year. But it’s not a long-term solution, as eventually Sears will run out of real estate and units to sell. The company’s Auto Center business and its Lands’ End division are on the chopping block too. That could certainly provide a temporary boost to future Sears earnings updates … but would also remove some of its more productive business units.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.