Retailers Still Struggling to Attract Consumers

Economic and earnings news wasn't all that strong today but the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has managed to gain 0.1% in late trading.

Initial  jobless claims rose 26,000 last week to 326,000, but we're still seeing a general downtrend in new unemployment filings. On the positive side, existing home sales rose 1.3% in April to a seasonally adjusted annual rate of 4.65 million. The median sale price was also up 5.2% to $201,700.

But the biggest reports today came from retailers Best Buy (NYSE: BBY  ) and Sears Holdings (NASDAQ: SHLD  ) , which can't seem to overcome the challenges facing the industry.

No end in sight to retail trouble
Sears and Kmart, which are both owned by Sears Holdings, are probably the best example of retailers that have failed to adapt to changing consumer tastes over the past decade. They have lost their value for consumers, and thus have little cash to invest in updating stores or expanding their footprint.  

Sears Holdings today issued its latest quarterly numbers, and they were not pretty. Same-store sales, the measure of a retailer's health, were up just 0.2% at Sears and down 2.2% for Kmart. Sears' numbers would have been even worse if it weren't in the process of closing 80 underperforming stores and selling off assets. There's almost no hope of a turnaround for Sears, and the value the company has is almost entirely in its retail assets.

Best Buy hopes that services like Geek Squad will keep customers from fleeing stores entirely.

Best Buy, which has also been a punching bag for Wall Street, reported adjusted earnings of $0.33 per share in its latest quarter, easily topping the $0.19 estimate from Wall Street. But that's almost entirely due to cost-cutting. Revenue was down 3% to $9.04 billion, and that's where investors should be very concerned.  

Management said same-store sales will likely fall in both the second and third quarters as well as consumers buy more electronics online.

Sears, Kmart, and Best Buy are all stuck in something of a no-man's land in retail, not quite specialty enough to attract product-specific consumers and not quite the one-stop shop that big-box retailers offer. The long-term result is falling sales and earnings; shareholders just have to hope they can squeeze out enough money to earn some sort of return at the end of the day.

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