What will Sears tell investors Thursday?

The retail chain is holding a rare earnings call. Could it have bad news to share?

By Jonathan Berr Feb 22, 2012 2:37PM
Sears Holdings (SHLD) is holding its first earnings conference call since the venerable retail chain was acquired by financier Edward Lampert in 2005, causing one observer to quip that "hell, it appears, has frozen over."

Interestingly, Lampert, who regularly vows to do better in shareholder letters, is not scheduled to speak on Thursday's call. Blogger Jeff Matthews, who first noticed the development, is not expecting good news. "After all, good news takes care of itself, but bad news needs explaining," he writes.

A spokesperson for the Hoffman Estates, Ill., company could not be reached for comment.  Shares of Sears Holdings, which have surged more than 60% this year on rumors that Lampert will take the chain private, are trading up $1.59 to $52.53, indicating that investors are not worried about the call. Matthews, however, may be onto something.

Under Lampert's leadership, Sears has repeatedly disappointed shareholders. Sales have declined for more than a dozen straight quarters, in part because the company has failed to articulate a coherent brand strategy. If Wal-Mart (WMT) has everyday low prices and Target (TGT) is where middle class shops, why do people need Sears? There must be more of a reason than the chance to acquire exclusive Kardashian merchandise. The reality-show family seems out of place next to well-regarded Sears brands such as Craftsman tools and Diehard batteries.

Lampert's stewardship of Sears Holdings has been a disaster from the get-go. Last year, Louis J. D’Ambrosio was named as CEO despite having no retail experience. Sears has since named ex-Brookstone executive Ron Boire as chief merchandising officer, which was a step in the right direction.

After a disastrous holiday season, Sears announced it would close as many as 120 poorly performing stores. Shareholders were left scratching their heads recently after Lampert bought $160 million in Sears stock without explanation.

Sears also is facing renewed pressure from J.C. Penney (JCP), whose resurgence under CEO Ron Johnson is earning kudos from Wall Street. By comparison, Sears comes across as outdated. Its best hope for success is as a private company.

D’Ambrosio should prepare for the conference call as if his job depends on it -- because it does. It also will be a wake-up call for Lampert.

"Either way, good or bad, the call does mean one thing: Eddie needs Wall Street now, and he needs it more than Wall Street needs Sears," Matthews says.

--Jonathan Berr is long Target.





2Comments
avatar
Sears is going Under or Private. I just can't see how sears can compete with Wal-Mart and Target. I use to shop at sears but now I do most of my shopping at Amazon.com or Wal-Mart. It's sad to see the company go but I'm not surprised at all. 
Feb 22, 2012 4:29PM
avatar

Sears branding like Kenmore ,Craftsman and Diehard are worth more than the company

itself. It needs to reinvent itself as a smaller type retailer - that is dump the huge stores and go for a smaller foot print that sells those great brands. Dump the clothing, Curtains, and all the other crap that anybody can sell.

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