Sears Holdings' Unexpected Loss

Sears Holdings (SHLD) reported its quarterly results early Thursday morning. Clearly SHLD earnings were a major disappointment losing 53 cents per share.

SHLD was forced to markdown products to keep its inventories at manageable levels. As a result the company's gross margins dipped by 90 basis points to 27.3%. The balance sheet is another story. Total debt was flat from the prior year while cash declined $2.1 billion.

The decline in cash is directly related to the nearly 22 million shares that SHLD repurchased over the past year. SHLD also announced another $500 million share repurchase. SHLD balance sheet is strong enough and in an excellent position to weather the current economic slowdown which is hitting SHLD on all fronts – appliances, automotive, home repair, lawn & garden and apparel. Operationally, SHLD gets an F and a B for its Balance Sheet from The Finance Professor.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of SHLD --- although positions can change at any time.