IB Net Payout Yields Model

Sears Holdings Has Suddenly Become a Retail Play Again

For the first time since 2004, Sears Holdings (SHLD) Sears Domestic unit has posted positive comps. Earlier today they provided updated guidance for the quarter ending May 1st and the market appears to love the news sending the stock up over 7%. Anybody following us know that we're invested in SHLD for it's brands and assets such as the commercial real estate. So any news that shows the KMart of Sears stores are rebounding is a plus to the investment theme.

SHLD forecasted earnings with a mid-point of $.15 compared to the $.03 analyst estimate.

  • For the quarter-to-date ("QTD") period through April 21, 2010 comparable store sales for our Kmart and Sears stores were as follows:




Sears Domestic




  • Kmart's QTD comparable store sales benefited from increases in apparel, home and toys categories. Sears Domestic's comparable store sales reflect increased sales of home appliances which benefited from the launch of new Kenmore products and a federally funded stimulus program to encourage customers to replace less energy efficient appliance products, offset by lower sales in the tools and home electronics categories.
  • We currently expect net income attributable to Holdings' shareholders for the quarter ending May 1, 2010 will be between $0 and $35 million, or between $0.00 and $0.31 per diluted share. In the first quarter of the prior year, we reported net income attributable to Holdings' shareholders of $26 million, or $0.21 per diluted share.

More details from Marketwatch. CS has some valid points about the comps, but the stock price tells a different story.

  • Quarter-to-date comparable sales rose 1.7%. At Sears U.S., they rose 0.3%, the first increase since the first quarter of 2004, paced by increased sales of new Kenmore home appliances and a federally funded stimulus program for consumers to buy more energy efficient products.
  • At Kmart, sales for the period through April 21 rose 3.2%, driven by demand for apparel, home and toys. That would mark the third straight quarterly gain at the discount chain after 14 straight declines.
  • "Buying more of a Canada, a much better-positioned retailer is a plus," said Credit Suisse analyst Gary Balter. "While the headline may show better comps, they should be viewed as disappointing in the context of competitors and even by the company's own standards. With Kmart productivity still so low, it's difficult for the 3% comps to translate into profits. Given Sears' exposure to appliances which we believe has been up double digits and a pick up in some seasonal business, and other broadline names potentially up mid to high single digits, this seems disappointing."

Disclosure: Long SHLD


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