What Happened to the Sears Rally? (SHLD, JCP, BBY, BKS, WMT, TGT, COST)

Over the last three months shares of Sears Holdings Corp. (NASDAQ: SHLD) have lost about a quarter of their value, falling from near $85 to around $52. In the three months preceding that drop, shares rose from around $29 to $85, again following a three month decline from about $82 in late October to $29 in early January.

One possible reason is that there are so many turnaround stories in retailing that investors can pick and choose almost daily. J.C. Penney Co. Inc. (NYSE: JCP), Best Buy Co. Inc. (NYSE: BBY), and Barnes & Noble Inc. (NYSE: BKS) are all tackling various strategies to stem their declines. The big box stores — Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), and Costco Wholesale Corp. (NASDAQ: COST) — have also posted double-digit share price gains in the last year, further calling into question the smaller rivals’ ability to recover.

For Sears, the company’s first quarter profit was soleyl due to asset sales. The consensus estimate for the current quarter calls for an EPS loss of -$0.93, worse than the adjusted loss for the previous quarter. Same-store sales are down and revenue is falling, and without more asset sales the company can’t hope to post a profit.

The run-up in the shares was not so much a function of Sears’ performance as it was a function of a belief by investors that the company would be sold off in pieces. Sears appears to have backed off that strategy and investors simply don’t see any other reason to buy the stock.

Shares are down about -1.5% today, at $52.21 in a 52-week range of $28.89-$85.90.

Paul Ausick