On Thursday, Sears Holdings Corp (SHLD) is expected to post its Q3 results. Analysts collectively expect the struggling company to post a loss of $3.31 per share of Sears stock, as of the latest look. That’s a pretty deep dip into the red ink, although sadly, it’s the sort of loss SHLD owners have grown accustomed to.
The organization has posted losses in nine straight quarters through Q2 of this calendar year, and barring some sort of sales miracle last quarter that nobody witnessed, is likely to report its 31st consecutive quarterly decline in year-over-year revenue.
The numbers have become a little irrelevant at this point, of course, as steep losses are now the expected norm for SHLD. Still, Sears stock is fun to follow if for no other reason than morbid curiosity – how much longer is CEO and hedge fund manager (and largest Sears stock owner) going to keep this thing propped up?
SHLD Earnings Outlook
If the pros are right, Sears Holdings is going to report the aforementioned loss of $3.31 per share of SHLD on Thursday on $6.88 billion in revenue. That’s down 12.2% and 16.8%, respectively, from the bottom line of $2.95 per share of Sears stock and $8.27 billion in sales in the third quarter of calendar 2013. And, two weeks ago the company itself indicated it was expecting a net loss of somewhere between $590 million and $630 million for Q3, versus a $534 million loss in the third quarter of last year.
It’s certainly not the progress owners of Sears stock were led to believe was on the way when Eddie Lampert took over as CEO in January 2013.
Although he has been directly involved in the retailer’s efforts since 2004, when he became chairman of the then-newly-combined Sears and Kmart Corporation, Lampert named himself chief of day-to-day operations nearly two years ago under the auspices of a successful (in his words) transformation of the department store chain.
Instead, sales and profit continued to deteriorate, and Lampert lopped off some of the company’s best profit-producing assets, all in the name of fund-raising.
And it’s apt to get worse for SHLD before it gets better.
While Sears generally doesn’t offer guidance beyond a few weeks out, that hasn’t prevented analysts from making educated guesses about what to expect in coming quarters. And, the guesses for Q4 — currently underway — suggest we haven’t seen the worst yet.
For the fourth quarter, the pros expect to see a loss of $2.71 per share of Sears stock, which is more than twice the loss of $1.13 per share taken in the same quarter of 2013. Sales are projected to roll in at 8.89 billion for the current quarter, which covers the busy holiday shopping season. That’s down 16.1% from the year-ago top line of $10.6 billion.
And just for the record, it’s not like analysts think the picture gets any rosier in 2015, or even after that.
Non-Performance Considerations for Owners of Sears Stock
With all of that being said, dismal results are no longer the focal point for Sears earnings reports. Of the most interest now is the retailer’s liquidity situation, which has been something of a roller coaster of late.
Per a recent blog post at the corporate website, Sears says it will have generated between $1.1 billion and $1.5 billion worth of cash/liquidity between September and today (Tuesday, the 18th).
It’s an impressive figure to be sure, solving one of company’s biggest worries heading into the busy holiday shopping season. Owners of Sears stock may want to read all the fine print related to the fund-raising, though.
Nearly $400 million was from the sale of Sears Canada Inc. (SRSC), and just more than $100 million was realized from the sale of the highly-trafficked Sears store in Cupertino, California. A rights offering worth more than $600 million was also part of the liquidity mix.
Admittedly, it was probably best in the long run to shed the struggling — and loss-creating — Canadian division, but in the shadow of the April spinoff of Land’s End, Inc. (LE) and several other real estate divestitures before that, Sears is selling pieces that it likely needs to drive the very sales and profits it needs to revive itself. That, or the liquidity measures are highly dilutive to existing owners of Sears stock.
Point being, the transformation efforts better start working in earnest soon, and turning a profit. Sears Holdings is running out of pieces to sell. The “transformation” has been underway for years and has yet to get any real traction.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
