Thursday, February 23, 2012


Through the wire this morning: Sears Holding Companies (SHLD)

Sears posted another quarterly and year-over-year loss, and now the group that owns both Sears and KMart is selling off several stores to a liquidity group, and has plans to lay off another undisclosed yet significant amount of employees in order to boost revenue and possibly post a profit for the first time since the two companies were merged back in 2005.

I have always been a fan of Sears and its products, while its cheaper, less desirable company portion (KMart) seems to be holding it back from significant profits, I can see Sears coming out of this very successfully. Yes, there have been talks that Sears will enter into bankruptcy protection, but I don't see the company going the way of Borders, Circuit City or other enormous Big Box chains as a result of the recession. The landscape and concepts for Sears' sales hasn't changed, nor has the demand; their appeal has been lost and sales, which traditionally would have been theirs in earlier times, have been displaced onto competitors such as Wal-Mart (WMT), Home Depot (HD) and Lowe's (LOW)s.

I'm a buyer of Sears IF they post a profit within any of the next 3 quarters. This time next year, look to see where Sears is. If their share price is above $60, I'm a long-term buyer. I think this is a very telling quarter for them and whether they emerge victorious or not is very contingent upon what the next few emerging-from-recession quarters look like for them. Sears products were once the staple of American do-it-yourselfers and weekend warriors and Craftsman is still a household name when it comes to tools, but the fact that they no longer offer a lifetime guarantee on their tools, I think, detracts from their appeal and makes competitors much cheaper and thus cheaply made tools seem more appealing.

Sears needs to reinstate their previous guarantees from bygone generations, needs to cut away some more of their non-profitable stores and needs to find a way to retake their business from the territories that were stolen from them by competitors.

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