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.

Will this stock be your next multibagger?
Retail is a tough investment right now but if you give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2968962, ~/Articles/ArticleHandler.aspx, 8/29/2015 7:37:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated 22 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
BBY $35.97 Up +0.17 +0.47%
Best Buy CAPS Rating: *
SHLD $27.30 Up +0.37 +1.37%
Sears Holdings CAPS Rating: *