Earnings Preview for Sears Holding Corporation

Sears Holding Corporation SHLD is expected to announce its Q1 earnings report on Thursday, May 19. Analysts expect a rough ride for Sears. Its earnings per share is expected to plunge on a yearly basis. The Street's Q1 estimate for Sears is a loss of $1.22 per share, or almost 4,000% below the value recorded in the same quarter last year. To add more worries, the Street's estimate was reduced by $0.10 in the last seven days. Thirty days ago, the Street's Q1 estimate was earnings of $0.03 per share. Analysts expect revenues to fall as well, though at a much lower pace. Sears' Q1 revenues should reach $9.63, or 4.1% lower than in Q1 2010. Sears Holdings Corporation is the parent company of Kmart Holding Corporation and Sears, Roebuck and Co. Sears Holding is broadline retailer with 2,201 full-line and 1,354 specialty retail stores in the United States operating through Kmart and Sears and 483 full-line and specialty retail stores in Canada operating through Sears Canada Inc, a 92%-owned subsidiary. Looking ahead, Sears' results should improve in the rest of the year. Analysts still expect both full year earnings and revenues to be lower than in 2010, however. Full year revenues are expected to reach $42.44 billion, or 2% under the 2010 level. Analysts expect Sears to report an annual loss of $0.34 per share, or a fall of 125.4% on the last year's value. In the upcoming quarter, revenues are projected to stand at $10.19 billion, or 2.5% above the equivalent value a year ago. Q2 earnings per share will still be in the negative area, as Sears is expected to post a loss of $0.53 per share. Investors agree on one thing: this will be a difficult year for Sears. Edward Lampert, CEO of Sears, tried to calm investors' anxieties by placing the blame on himself. In the beginning of May, Mr. Lampert said there was no excuse for such bad Q1 performance and that Sears has to and will improve. Sears Canada reported heavy losses earlier this month. Sears Holding Corporation owns 92.4% of Sears Canada. In Q1, Sears Canada reported a loss of C$49.5 million or C$0.47 per share, compared to C$8.8 million loss (C$0.08 per share) in Q1 2010. To add to Sears' problems, competition in the Canadian retail market will become a lot fiercer when Sears' old rival Target TGT enters Canada. It seems Sears is trying to save a penny anywhere it can. It makes no secret of its plans to move its headquarters from Chicago, Illinois, when incentives expire in 2012. In the wake of a huge income tax increase enacted by Illinois in January to address a budget deficit that was heading toward $15 billion, states like New Jersey and Wisconsin launched plans to sway Illinois-based businesses to relocate. Illinois is not staying idle, however, as its Governor Pat Quinn signed a bill into law targeting Internet sales. The law is intended to expand the collection of sales taxes on items bought over the Internet. Sears welcomed the law, as the law will put Internet retailers on level playing field with other retailers. Investors will be interested in following a legal case between Skechers USA SKX and Sears, in which Skechers is claiming Sears was selling footwear that infringed on some of its brands, including the Shape-up line. Shape-up, popular toning shoes, is a major revenue source for Skechers. Probably the biggest concern for investors, however, is that Sears just does not seem to be able to fight off its main competitors – Wal-Mart WMT and Target. The company has seen sales fall every year since it was formed through the merger of Sears and Kmart in 2005. As a result, many investors believe that Sears' problems are much deeper than bad weather or housing slump, and Sears will have to persuade them that is it able to turn the tables around. Rating agencies are not very optimistic about Sears. At the moment, two agencies have a Hold and three Underperform rating. Investors will not find comfort in last year's quarterly results, when Sears managed to fall 127% below analysts' expectations on two occasions. Its shares are currently standing at $74.66, or 0.74% below yesterday's close.