Sears Is Holding Strong

Given what is happening in the retail universe right now, this is an outstanding report from Sears (SHLD).

HOFFMAN ESTATES, Ill., Jan. 8 /PRNewswire-FirstCall/ -- Sears Holdings Corporation (the "Company", "we", "us", or "our") (Nasdaq: SHLD) today announced domestic comparable store sales for the five-week ("December"), quarter-to-date ("QTD") and year-to-date ("YTD") periods ended January 3, 2009 for its Kmart and Sears stores as follows:

Kmart's December comparable store sales benefited from a year over year increase in sales made through our layaway program. Sears Domestic December comparable store sales reflect reduced sales across most hardlines and apparel categories. We believe that comparable store sales were affected by unfavorable economic conditions, including the weak housing market and consumer credit issues.

Gross margin rates for the quarter-to-date period improved slightly from last year as higher margin rates at Kmart were somewhat offset by lower margin rates at Sears Domestic. We currently expect that net income for the quarter ending January 31, 2009 will be between $300 million and
$380 million, or between $2.44 and $3.09 per fully diluted share. Our expectation of fourth quarter net income and earnings per share excludes the potential impact, if any, related to store closings, restructuring activities including severance, mark-to-market gains and losses on hedge transactions executed by Sears Canada and impairment of goodwill and other intangible assets as prescribed in Statement of Financial Accounting Standards No. 142. In the fourth quarter of the prior year, the Company reported net income of $426 million, or $3.17 per fully diluted share.

For the full year ending January 31, 2009, the Company expects net income to be between $163 million and $243 million, or between $1.27 and $1.90 per fully diluted share, which also excludes the potential fourth quarter impact, if any, related to store closings, restructuring activities including severance, mark-to-market gains and losses on hedge transactions executed by Sears Canada and impairment of goodwill and other intangible assets as prescribed in Statement of Financial Accounting Standards No. 142.

During the month of December 2008, we repaid all borrowings under our revolving credit facility as working capital needs declined as expected (although we do expect to borrow under the revolver again in January 2009 due to the seasonal increase in working capital). We currently expect to end the fiscal year with approximately $1.3 billion in cash and cash equivalents (of which approximately $600 million will be domestic and $740 million will be Sears Canada). The expected cash and cash equivalents balance indicated does not give effect to any share repurchase activity after January 7, 2009. In addition, we currently expect to end the fiscal
year with approximately $8.5 billion of domestic inventory, down from $9.1 billion last year, despite the addition of approximately $135 million of Kmart footwear inventory. Kmart began operating its footwear department on January 1, 2009. Prior to that time, Kmart's footwear department was operated as a licensed business by another party.

Also during the fourth quarter, we repurchased 2.9 million common shares at a total cost of $119 million (or $40.82 per share) under our share repurchase program. As of January 7, 2009 we had remaining authorization to repurchase $506 million of common shares under the previously approved programs.

It is looking like Sears' decision to be first in launching its layaway program was a real winner with consumers and a coup for the company. Also, how happy are shareholders that there is still $1.3 billion in the bank and the debt repaid? With the destruction of balance sheets happening all over retail, Sears is holding strong, very strong....

This is really good news folks...really good...

Like the auto retailers, those who end up standing tall after this carnage will be the winners and emerge stronger. Sears is levered heavily to the home. With Linen's N Things "sleeping with the fishes", that leaves one less place for folks to buy those items. Given that many of them are in the same malls as Sears, that means by default these shoppers will wander into Sears for these items.


Disclosure: Long SHLD

Comments

[jljamup:]

who believes sears sales report, Madoff is waiting for you to send him your money. how would any one know if those layaways have been picked up and paid for. better wait final results.

Jan 09 07:21 AM

[Paul Price:]

The numbers were horrible if you read what they EXCLUDED.

Same store sales went down dramatically and EPS for the year are a fraction of those from the previous year.

This was SPIN 101 and short covering was the only reason for yesterday's big surge. The smart money will be selling into that absurd reaction to BAD NEWS.

There's a 50-50 chance of bankruptcy within 12 - 18 months for SHLD.

Jan 09 08:14 AM

[donzoab:]

What a bunch of hype. SHLD is a failed franchise. Go into the store. They are rat holes. The bathrooms in the store in Quakerbridge Mall NJ hadn't been cleaned in weeks. Disgusting. Merchandise all over the floor. Sales associates standing around complaining about work conditions. Just the worst shopping experience I have ever had. I wouldn't buy there if they were giving stuff away. Time for them to liquidate.

Jan 09 09:12 AM

[MrsLinarcos:]

Never read so much smoke and mirrors going on with this company and I used to work for them. I'm glad I'm out and I don't like the manipulation Lampert does to get the stock go up. I still believe in the next few months we'll hear about SHLD going into bankruptcy.

Jan 09 09:25 AM

[marva66:]

I do not believe Sears Holding numbers. I know many stores were down 20 to 30% for the month of December. They are seeking a 2 billion line of credit and how would it look to their future creditor if the real numbers where there. Be careful of their stock, there has been massive buybacks by Lampert and it looks like short selling has been going on. I wouldn't put my money into something that has the reputation of not just being a merchant which dropped the ball long ago but treats their associates like they are insignificant. Remember there were several stores closing in December and those same store sales could help prop up a false set of rises in same store sales. it also will be interseting to know there default rate on credit cards. I expect them to close more stores, cut more positions, squeeze their employees for their last drop of blood. But the guys on top will leave a smaller, uncompetitive company while they fill their pockets before they have sealed their fate. Strong is not how I would describe them.

Jan 09 09:58 AM

[User 294358:]

Some people just don't seem capable of comprehending the fact that Eddie Lampert is NOT the brilliant investor you all made him out to be when he was picking all that low hanging fruit a couple of years ago. The man has lost 5 billion dollars and if you've lost part of that along with him, please, just give it up. You're not going to get a truly informed public to try to get any of it back for you.

Jan 09 10:50 AM

[Jim Not C:]

Nice article.

Should give a .02 push around lunchtime.

Jan 09 11:19 AM

[fcharlie:]

Holy smokes, i don't think i've ever seen such a pissed off bunch of people in my life!

You don't believe the sales numbers? You can't lie about that. You don't believe the cash? You can't fake it, accountants check. Saying they are going bankrupt in the next couple of months? When was the last time a profitable company went bankrupt? Saying they should liquidate? Okay, and the stock goes up even more. wondering how many defaults they will have on their credit cards?? They sold their credit card receivables to Citigroup years ago. Call Sears Mastercard and ask the person you speak with who they work for... Not Sears. Saying the layaway sales figures are a lie? You can't lie about it, brush up on your accounting, you don't book the sale until it's picked up and paid for. Just like an airline can't book sales for 6 months into the future, even though they have the cash in hand...they have to wait until people actually fly to book the sale. You can't book a gift card purchase as a sale either, you have to wait until it's redeemed.

Wow. You guys just keep selling your shares to Eddie. He will gladly buy every one of you off at these prices.

Jan 09 11:59 AM

[Nate Dogg:]

Geez. Why do you guys hate Lampert so much?

You would think he kidnapped one of your family members and handcuffed them to a toilet for 36 hours or something.

Jan 09 12:17 PM

[marva66:]

Worked for Sears Holding and know more about the games their playing. They do get hurt along with Citi when customers default on credit cards. They have damaged relationships with vendors, customers and employees. Both companys under the holding companies umbrella used to be strong companies. Lampert is not a retailer and has damaged alot of people's lives in the process of trying to run a business he has no clue about. Meanwhile he won't leave empty handed, but many low wage earners will leave with empty pockets. It's an example of how not to run a corporation. Climb on board the Titanic if you think differently and hope you can get on a lifeboat on its way down.

Jan 09 03:51 PM

[fcharlie:]

marva66.

can you give more specifics on sears' deal with citibank for their credit card accounts? what type of impact does sears feel if someone defaults? what % of the interchange fee do they get? any ideas?

Jan 09 05:27 PM

[Urbane Gori...:]

I believe marva66. I don;t hate Lampert. In fact, I don;t know him.... But I have been in and will not shop either Kmart or Sears ever again. That's saying a lot. I have to drive 1 1/2 hours to Sacramento to shop.

As noted above, the stores are ratholes. They are improperly stocked and the concept of service is non-existant. I don;t even like being pounced on the moment I walk into a store, but when you have to walk back to the front counter, and wait in line just to have someone show at the counter in teh back of the store to find something that should be readily stocked.... Gee! I dunno.... That sure says a lot.

I read something awhile back about Lampert's financing. I can''t remember all the details, but it too was a 'SeekingAlpha' article. In essence, SHLD bought back stock at a time when the stock was higher and the author was concerned that SHLD would do that rather than retiring some heavy interest rate financing. It was well spelled out and seemed pretty squirrely to me. I wouldn't own SHLD.

jegan

Jan 09 06:14 PM

[marva66:]

This is a simple explanation and it is not detailed but a merchant is charged a lower rate to have credit services or a branded card with their logo when certain things are met. The more applicants it can pick up and the accounts are not in high default than the merchant gets the lower interest rate. If the application and acceptance rate is not adequate, than this can cause the merchant to pay a higher rate of interest for the credit. Default rates can affect the rate especially on a branded card. It is not a free ride. Big stores will rarely if ever restrict small charges under ten dollars but if you frequent a small business alot of times they will not accept charges under ten. it costs too much for the merchant to do those transactions. if you have had the pleasure of going into Sears or Kmart than you will experience the Sears credit card push which they require their associates to push. Some stores will take hours away from cashiers for not having quotas met. What they pay the banks has an affect on bottom line. With shrinking store traffic I am sure they are trying to prevent an increase in what they pay as they cannot get people to sign up for the sky interest rate they charge.

Jan 09 07:20 PM

[retailerzee:]

Geez do you guys all own Walmart stock or something? It isnt all about Lampert...there are thousands of every day folk who have worked their entire lives for Sears and Kmart. They take pride in what they do, or they would have quit a long time ago. These two companies were retailer pioneers...yes they have lost direction, but I'd rather support these two pioneers than making the Walton family gain billions of dollars each and every year. Think about it.

Jan 09 07:30 PM

[najdorf:]

Look, you don't have to be a genius to figure out what's wrong with Sears. Go to any store, then visit the nearest Walmart, Target, and Best Buy. The energy level and foot traffic are on completely different levels. Sears is paying for huge mall spaces that no one wants and failing to draw customers. The best case scenario is that a Walmart or Target decides they want to be in the mall and buys out their leases. That won't happen because it's easier for those stores to run as stand-alones.

Sears is just not a good business - it has poor brand image, disgruntled employees, and few customers. You can't make money investing in poor businesses at prices anywhere above clearly dirt-cheap (like below cash on the books). Even Warren Buffett failed to make much on floundering department stores investments.

Jan 10 08:31 AM

[Rigster:]

Sears Holdings Will be # 1 mock my words. And yes I agree with you Todd, I think they have stabilized the losses and when the market bottoms, which I also think we just about very close to one, Sears will be one of the first retailers moving in an upward trend! As a shareholder that has been going to the shareholder meetings for many years now, Mr Lampert and his executive team all along have paid down their long term debt at Sears Holdings when retailers like Macys and JCPenneys kept increasing their long term Debt!

Jan 10 01:18 PM

[Rigster:]

Great article retailerzee!

Jan 10 01:23 PM

[fcharlie:]

Rigster,

I was thinking about going to the annual shareholder meeting for the first time this year.... Tell me about it.

Are all the board members there? How much time is spent answering questions? Did alot of shareholders show up? Did everyone have an opportunity to ask a question if they wanted? Who did most of the talking? Lampert or others?

Jan 10 04:48 PM

[Rigster:]

Hello fcharlie, fcharlie trust me. I'm not an individual to comment on things all the time or an outspoken individual. But I'll tell you this. Eddie Lampert who happens to be one of my BIGGEST HEROES is right about how retail is being managed. I think for many years now retail is being managed on the old saying to spend money to make money scenero. I disagree with that scenero. fcharlie, if you can do it. I would go to the meeting at Hoffman Estates. They give you 2 minutes to give out questions and Mr Lampert will answer your questions directly to you! You will see my Uncle and myself there at the meeting in May of 2009 People are wrong about Sears Holdings and it will be proven in the long term!

Jan 10 10:22 PM

[Works for s...:]

I am sure part of this cash flow they report is cause they stopped matching for the 401k didnt happen to read about that

Jan 13 02:24 AM

[BSexposer:]

Nice cut and paste job, Todd - too bad nothing - NOTHING - can save SHLD from ultimate BK - sorry bro. The only reason the stock is where it is is b/c Lampert and his hedge fund pals have corned the stock and there are no shares to short - this won't last forever.

"It is looking like Sears' decision to be first in launching its layaway program was a real winner with consumers and a coup for the company." PLEASE TELL ME YOU ARE NOT SERIOUS - LAYAWAY??????? - YOU'VE GOT TO BE KIDDING.

"This is really good news folks...really good..." I CAN PRACTICALLY SMELL THE DESPERATION - TOO FUNNY. OK, IF YOU SAY, SO TODD (WINK WINK).

Keep up the good work, Mr. Pumper Todd - lol

Jan 20 11:05 AM