Sears Holdings (Nasdaq:SHLD) posted a larger than expected loss for the quarter as its Sears stores continued to underperform. Despite a better performance from its K Mart division, overall revenue fell. (For more check out Analyzing Retail Stocks.)

TUTORIAL: Economic Indicators

A Cold Brand
The problems at Sears are long-standing and ongoing. Four years of sales declines saw revenue slide to $43 billion in 2011 from $53 billion in 2007. The company had been without a CEO for the last three years until Lou D'Ambrosio was installed in February by Sears chairman, and billionaire hedge fund manager, Edward Lampert, who had been running the company. Sears has been plagued with too many poorly performing stores, tired brands and a lack of anything new and exciting for shoppers. If good brands are hot, Sears is running cold right now and has been for a long time.

Another Poor Quarter
Sears lost $170 million, or $1.58 per share, with an adjusted loss to $1.39 per share . Last year's first quarter profited $16 million or 14 cents a share. This quarter, revenue fell to $9.71 billion from $10 billion last year's quarter. The well-known brands such as Kenmore and Craftsman in the hard lines and Jaclyn Smith in clothing have not provided the impetus to get the moribund retailer moving. (To learn more about quarterly results, read Strategies For Quarterly Earnings Season.)

Retail Mixed
Although the economy can be held accountable for some of Sears' troubles over the past few years, other retailers have emerged with better performances. Macy's (NYSE:M) is one of note. Also, Dillard's Dept. Stores (NYSE:DDS) and JC Penney (NYSE:JCP) have shown improvement recently. The luxury retailers such as Saks (NYSE:SKS) and Nordstrom's (NYSE:JWN) are in a retailing sweet spot - essentially a world of their own right now.

One of the newer pressures on Sears and K Mart is the performance of the dollar stores on the lower end of the retail spectrum. With Dollar Tree (Nasdaq:DLTR) and 99 Cents Only Stores (NYSE:NDN) expanding their grocery offerings, this can chip away at K Mart's stagnant grocery business. The biggest problem for Sears, though, is that it cannot find its niche. This problem is so long-standing that it has become embedded. (To read more on how to value stocks, check out Peer Comparison Uncovers Undervalued Stocks.)

Sears Holdings was also affected when K Mart lost the Martha Stewart brand. It needs to re-invigorate its brands and do something to attract customers who are concerned about the rising cost of gas and food. Sears also chose to buy back stock rather than deploy capital to refurbish stores. The need to bulk up the grocery offerings in K Mart to fend off competition could become critical. K Mart at least has been making some progress in the last couple of years, the lone bright spot during this cloudy period.

Bottom Line
There are other questions about Sears' strategic directions. One wonders if the Kardashian Kollection will have any appeal for middle America the way that Sears brands used to. The question of who will partner with Sears is a legitimate one. Also, the leadership of Sears under Lampert has been questionable. Investors might wonder at the wisdom of the move of bringing in D'Ambrosio as CEO, as he is not a retailer.

The question you hear from shoppers is the same one you hear from Wall Street: what is Sears? Where does it fit on the spectrum of retailers? It looks as though even Sears still has no idea. (To help identify troubles of a company, check out Warning Signs Of A Company In Trouble.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    How Toyota Succeeds at Home and Abroad (TM)

    Japan's biggest car manufacturer is also one of North America's biggest, delighting shareholders with its high profit margins.
  2. Stock Analysis

    Starbucks: Profiting One Cup at a Time (SBUX)

    Starbucks is everywhere. But is it a worthwhile business? Ask the shareholders who've made it one of the world's most successful companies.
  3. Stock Analysis

    How Medtronic Makes Money (MDT)

    Here's the story of an American medical device firm that covers almost every segment in medicine and recently moved to Ireland to pay less in taxes.
  4. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  5. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  6. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  7. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  8. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  9. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  10. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center