Personal Finance

Why Sears Holdings Corp. Stock Popped Today

The exterior of a Sears department store.

What happened

Shares of Sears Holdings Corp. (NASDAQ: SHLD) were moving higher today after the struggling department store chain posted results that weren't as bad as expected in its second-quarter report. Its slide in revenue slowed, though it continued to report wide losses. As of 10:58 a.m. EDT, the stock was up 11.6%.

The exterior of a Sears department store.

Image source: Sears Holding.

So what

Comparable sales in the period fell 3.9%, much better than double-digit declines in the prior quarter, as the company benefited from the closure of underperforming stores and saw comparable sales growth in categories like apparel, jewelry, and footwear. Total revenue plunged again, falling 26% to $3.18 billion due primarily to the store closures, but that topped estimates of $2.91 billion.

Despite the improving comps, its bottom-line loss still doubled from $2.33 a share to $4.68 as expenses as a percentage of revenue continued to grow, and interest expense rose as the company took on more debt.

CEO Eddie Lampert said the company posted positive comparable sales in July and August of 3% and 2.5%, respectively, adding: "We continue to close unprofitable stores, and we are hopeful that we can stabilize our store base at a meaningful level in the near future. Our goal is to rightsize our store footprint to a solid base from which we can operate and grow profitably, while leveraging our online and Shop Your Way platforms."

Now what

The improving comparable sales and positive results are clearly good signs for Sears and its investors. However, the fact that its losses continue to widen shows the desperate condition the company finds itself in. With consumer confidence near record levels and retail spending up across the board, now is the best time for Sears to mount a comeback. If the company can truly rightsize itself and deliver more comparable sales, it should be able to gradually narrow its loss, though a shortfall of $508 million in a quarter won't be easily erased. With looming debt maturity coming, bankruptcy still looks likely in the coming years. Still, the company's prospects look better today following this report than they did yesterday.

10 stocks we like better than Sears Holdings

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Sears Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More