Sears Expects Earnings Rebound - Analyst Blog

Sears Holdings Corporation (SHLD) after suffering a double-digit loss in the third quarter of fiscal 2010, now expects to rebound and post a net income for the quarter ended January 29, 2011. The company anticipates earnings in the range of $370 million to $450 million, which entails earnings per share of $3.39 to $4.12. The company had earned $3.74 per share in the prior-year period.

For the full year ended January 29, 2011, the company expects to earn in a band of $130 million to $210 million or $1.16 to $1.88 per share.

Comparable-Store Sales Update

The company, owning Sears and Kmart stores, declared a December comparable-store sales decline of 1.7%. While Kmart clocked a 2.3% growth in comparable-store sales, Sears Domestic registered a decline of 6.0%.

Till date in the fourth quarter, the company has attained a comparable-store sales decline of 1.1%. The Layaway program coupled with solid toys, home, sporting goods, apparel and footwear categories helped Kmart to deliver comparable-store sales growth of 3.4%.

However, eating into Kmart's success is Sears Domestic's dismal performance in consumer electronic categories, particularly appliances and tools, with comparable-store sales at these stores dropping to 5.3%.

Year to date, comparable-store sales dropped 1.6% mostly attributable to  a comparable-store sales decline of 3.8% at Sears Domestic partially offset by a 0.8% growth at Kmart stores.

Financial Position

The company expects to end the quarter with a net cash balance of $1.1 billion. During the fourth quarter, through January 10, 2011, the company has bought back approximately $77 million worth of shares. As of January 10, 2011, the company is left with $187 million of common shares, to be repurchased, as per the authorization.

Sears, whose portfolio of brands include Diehard, Craftsmen and Kenmore, faces stiff competition from rivals like Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT).

Sears' shares maintain a Zacks #5 Rank, which translates into a short-term Strong Sell recommendation. Our long-term recommendation on the stock remains Neutral'.

 
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