Sears Posts Loss as Expected, Revenues Light (SHLD)

Sears Holdings Corp. (NASDAQ: SHLD) reported an adjusted second-quarter net loss of $0.86 per share and $9.47 billion in sales before markets opened today. In the same period a year ago, the retailer reported a loss of $1.27 per share on revenue of $10.33 billion. Second-quarter results compare to the Thomson Reuters consensus estimates for a net loss of $0.86 per share and $9.63 billion in revenue.

The company’s president and CEO said:

[W]e have improved our profit position, as we reduced expenses and expanded margin rate through more effective promotional design. We have also successfully lowered inventory, reduced debt from year end, and enhanced our liquidity. In addition, the Sears Hometown transaction remains on track to close in the third quarter.

Same-store sales at U.S. locations fell 3.7%, driven by slowdowns in consumer electronics sales, lawn and garden sales, lower apparel clearance sales and a decline in pharmacy sales. The company’s operating loss shrunk by $88 million year-over-year due to a reduction in overhead and a rise in gross margins that was partially offset by a decline in sales.

Sears did not offer any outlook information, but the consensus estimates for the current quarter call for a per-share loss of $2.30 on revenue of $8.78 billion, and for the full-fiscal year ending in January 2013 a net loss of $2.63 per share on revenue of $39.35 billion.

The spin-off the company’s Hometown stores, the closing of U.S. Sears and Kmart stores and the partial spin-off of Sears Canada, combined with continued weak results and estimates naturally lead to the conclusion that Sears as we know it will soon disappear. This is almost certainly one of those cases where the parts are more valuable separately than they are together.

Shares of Sears are up 2.5% in premarket trading this morning, at $58.01. The current 52-week range is $28.89 to $85.90. Thomson Reuters had a consensus analyst price target of $21.50 before today’s results were announced. Perhaps the lack of interest in refreshing the target price says more than anything else could about the future of Sears.

Paul Ausick