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Sears Holdings – The Clock Is Ticking for SHLD

The post-earnings pop from SHLD doesn't change the distinct possibility of bankruptcy

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Another decline in quarterly revenue came as no surprise when Sears Holdings (SHLD) reported first quarter results on Thursday morning. The retailer has been shedding revenue-bearing properties like Lands’ End (LE) in earnest for about three years now, while simultaneously axing operational stores; 80 more stores have been or will be closed in 2014.

sears close up 630
Source: Flickr

What did come as a surprise is, even while the company is clearly on a path to bankruptcy, CEO Eddie Lampert continues to bang the “turnaround” drum to the few faithful Sears stock holders left.

Folks, it’s over, both for the company and (sooner or later) for SHLD.

It’s not a matter of “if” anymore. It’s just a matter of “when.”

Bankruptcy truly may be on the horizon.

Numbers Don’t Lie

For those who haven’t heard, last quarter, Sears Holdings saw year-over-year sales drop by 6.8%, to $7.88 billion. By retail standards, it was a disaster, although not as disastrous as the much bigger loss the company posted for the first quarter (Sears lost $402 million, vs. $279 million in the year-ago period). More damning: It was the 29th straight quarter of falling revenue.

On a per-share basis, SHLD posted a loss of $3.79 per share, versus a loss of “only” $2.63 in the first quarter of last year.

And yet, Sears stock didn’t do anything like what you’d expect. Following the report, SHLD stock quickly reversed an opening loss and finished with a 4%-plus gain.

The prod for the pop? Everything being relative, investors — some investors — liked the fact that things could have been much worse for Sears Holdings. And those who weren’t impressed by the relative success might have been encouraged by Lampert’s pep-talk. The master of spin once again offered hope, writing in his quarterly letter to shareholders:

“Sears is undergoing a significant transformation, and we fundamentally are changing the way we do business. Our performance in the first quarter highlights the challenges we are facing as well as the progress we are making in this transformation. We are moving away from a company that was heavily based on selling products solely through a store-based network to a member-centric business model focused on providing benefits to our members anytime and anyplace. We are seeing progress in our transformation to a member-centric, integrated retailer, as we continue to invest heavily in driving our Shop Your Way program.”

He used the word “progress” twice, and yet we’ve not actually seen any — in years — where it counts.

He also used the word “transformation” twice, and though one could arguably call Shop Your Way a transformation, the program has yet to actually make any aspect of the business better despite its launch years ago.

It’s time for a reality check.

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