Sears Holdings Corporation (SHLD), the fourth largest broadline retailer in the United States, is scheduled to report its second-quarter 2011 financial results before the opening bell on August 18, 2011.
The current Zacks Consensus Estimates for the quarter is a loss of 64 cents a share. For the quarter under review, revenue is expected at $10,097.0 million, according to the Zacks Consensus Estimate.
First-Quarter 2011, a Synopsis
Sears Holdings reported first-quarter 2011 adjusted loss of $1.39 per share, well above the Zacks Consensus Estimated loss of $1.22 per share and plunged drastically from the prior-year quarter earnings of 16 cents per share. Including special items, loss per share came in at $1.58 compared with earnings of 14 cents in the prior-year quarter.
The drop in quarterly performance of the company was primarily due to the sluggish top-line performance. Management’s cost-cutting measures for boosting profits were largely criticized as improving the merchandise mix and customer service would have been a better option.
For the first quarter of 2011, revenue inched down 3.4% to $9,705.0 million compared with $10,046.0 million in the prior-year quarter. However, revenue surpassed the Zacks Consensus Estimate of $9,643.0 million.
The decline in quarterly revenue primarily reflects a drop of 9.2% in comparable store sales at Sears Canada, partially offset by a favorable foreign currency fluctuation. Moreover, the company witnessed a 3.6% decline in domestic comparable store sales, which includes 5.2% fall at Sears Domestic and a 1.6% decrease at Kmart.
Second-Quarter 2011 Zacks Consensus
The analyst covered by Zacks expects Sears Holdings to post second-quarter 2011 loss of 64 cents a share, significantly higher than the loss of 19 cents delivered in the prior-year quarter. The current Zacks Consensus Estimate ranges between a loss of 38 cents and $1.00 a share.
Zacks Agreement & Magnitude
Over the last 7 and 30 days, not a single analyst has revised estimates for the upcoming second-quarter 2011.
Mixed Earnings Surprise History
With respect to earnings surprises, Sears Holdings has thrice missed the Zacks Consensus Estimate over the last four quarters in the range of approximately negative 84.1% to positive 4.9%. The average remained at approximately negative 24.7%. This suggests that Sears Holdings has missed the Zacks Consensus Estimate by an average of negative 24.7% in the trailing four quarters.
Our View
Sears Holdings operates in a fiercely competitive industry, which includes retailing giants such as Wal-Mart Stores Inc. (WMT), Target Corporation (TGT) and The Home Depot Inc. (HD). Moreover, the company also faces competition from regional departmental stores, home improvement stores, consumer electronics dealers and specialty retailers. Consequently, this may dent the company's future performance.
Moreover, the company's customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively affect their discretionary spending, and in turn, the company's growth and profitability.
Further, Sears Holding's financial performance may be substantially affected due to its significant presence in international market (11% of fiscal 2010 revenue), which exposes it to unfavorable foreign currency translations, economic or political instability and other governmental actions on trade and repatriation of foreign profits.
Sears Holdings currently has a Zacks #5 Rank, implying a short-term Strong Sell rating. Over the long term, we have an Underperform recommendation on the stock.
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