Never mind that the company missed earnings forecasts. More important, for the retail operations, is the tone of the release: Rising inventories and slowing comp-store sales in the face of more competition. "The comparable store sales declines at both Kmart and Sears Domestic reflect the impact of increased competition and lower transaction volumes," the company said.
Increased competition, lower comp-store sales: Not a good combo for a retailer. But Sears is no longer a retailer. It’s a hedge fund -- evidenced by more than half its earnings per share coming last quarter from high risk “total return swap income," which Sears describes as “derivative contracts that synthetically replicate the economic return characteristics of one or more underlying marketable equity securities.”
Sears adds, “These investments are highly concentrated and involve more substantial risks.”
All you can ask for is disclosure, not that it matters. Investors in Sears aren’t -- or shouldn't be -- there any longer for the success of Sears, the retailer. They’re there for Chairman Eddie Lampert’s next big deal, whatever that may be.