Sears Holdings Corp. (NASDAQ: SHLD) posted a 52-week low on the first trading day after the downgrade of US debt. That low point might not last too long given the company’s second quarter earnings report released this morning. Analysts weren’t expecting much and Sears missed those already low expectations by a mile.

The company reported an adjusted EPS loss of -$1.13, compared with a consensus estimate of -$0.46. Revenue totaled $10.3 billion, slightly better than the estimate of $10.13 billion. Consensus estimates for the rest of the year include EPS losses of -$2.14 in the October quarter and a full-year loss of -$0.99. Like Wal-Mart Stores Inc. (NYSE: WMT), same-store sales fell in the quarter, down -0.7% compared with Walmart’s decline of -0.9%. Target Corp. (NYSE: TGT) posted same-store sales growth of 3.9%.

Sears suffers from the same basic malady as Walmart — it can’t hold on to customers and margins at the same time. Sears closed 29 stores during the quarter, seven product repair centers, and fired another 250 support staff.

At the end of January, Sears employed 312,000 people worldwide. Target, which is about five times larger than Sears as measured by market cap, employed 355,000 people. On their most recent annual reports, Sears reported total revenue of about $43 billion compared with Target’s $68 billion. For Sears that calculates to about $138,000 in revenue per employee. Target reaps about $192,000 per employee and Walmart with 2.1 million employees takes in about $203,000 per employee.

Sears has a margin and an inventory problem, and in the second quarter they decided to attack the inventory. That approach resulted in a substantial decline in inventories, but it created havoc with margins. Inventories at the end of the quarter were just $4 million less than in the same period a year ago, after ballooning in the first quarter.

Gross margins fell to 22.8% from 26.9% in the first quarter, but was essentially flat with the second quarter of 2010. And Sears operates an additional 74 stores now compared with the second quarter of 2010.

Sears has too many stores and too many employees. And to combat these issues the company has hired new management, introduced a new refrigerator, and is preparing to launch the “exclusive” Kardashian Kollection at Sears stores. That ought to fix things right up.

Sears’ shares are off about -3.7% in after-hours trading according to Google Finance, at $57.91, below the 52-week low of $58.45. The 52-week high is $94.79, and is in no danger.

Paul Ausick

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