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Summary

  • Sears missed its revenue and earnings estimates for Q2.
  • This reinforces my negative outlook for the stock.
  • I pointed out the declining metrics in my last article on Sears.

Sears Holdings (NASDAQ:SHLD) missed its earnings estimates for the second quarter in a row. Revenue for Q2 2014 declined 9.8% to $8 billion, missing estimates by $130 million. EPS declined to a loss of ($5.39) as compared to a loss of ($1.83) in Q2 2013, which was below estimates of ($2.39). EBITDA for the quarter reflected a loss of ($313 million) as compared to a loss of ($78 million) in Q2 last year. This performance reinforces my negative outlook for company. Although a turnaround for the company is possible, I don't see any positive catalysts for the company or the stock any time soon.

Sears Full-line stores did achieve an incremental 0.1% increase in comparable stores sales, while Kmart's comparable store sales declined 1.7%. Overall, domestic comparable store sales declined 0.8%. Online and multi-channel sales increased 18%, showing a bright spot in the dismal quarter. However, gross margin decreased 390 basis points to 21.7%. Sears closed 95 stores so far in 2014, with a plan to close a total of 130 stores for the year.

I pointed out the company's declining metrics and negative outlook for the stock in my last SHLD article. The company's performance since then was poor and the outlook for the future also looks bleak. Analysts are expecting revenue to decline by 4.7% for the fiscal year ending in January 2015 with an expected decline of 3.7% for FY16. The company is also expected to increases its EPS losses by 14.5% from ($7.98) for FY15 to ($9.14) for FY16. Overall, with the company continuing its decline in revenue and earnings, I expect the stock to trickle lower over at least the next year.

Source: Update: Sears Holdings - Not Much To Be Desired In Q2 Earnings