Avoid This Shambling, Soulless Wreck of a Stock

Sears Holdings' (Nasdaq: SHLD  ) nasty financial tidings last week further supported the anti-Sears sentiment some of us have harbored for quite a while. Forget about arguments that this is actually a real estate play rather than a retailer. What Sears really seems to be is a vehicle for losing money.

Some investors fled after Sears revealed that first-quarter same-store sales dropped 3.6% and warned that it expects a quarterly loss of $1.35 per share to $1.81 per share. Analysts had expected a first-quarter profit of $0.03 per share, so you can see why fleeing the stock looked like a darn good option.

There's been plenty of fretting about the future of Wal-Mart (NYSE: WMT  ) and Best Buy (NYSE: BBY  ) , given flagging sales in the U.S. But regardless of the short-term hand-wringing about their prospects, both of those companies remain very relevant companies on the retail landscape, even if their sales growth could be more robust. You can't really say the same of Sears.

Sears' pathetic first-quarter tidings show that it isn't wooing customer traffic from rivals, nor is it in much of a position to improve its outlook. Furthermore, Sears isn't even cheap. It's trading at 65 times earnings, and its PEG ratio is an absolutely mind-boggling 8.81.

Compare Sears to Wal-Mart (P/E: 12), Target (NYSE: TGT  ) (P/E: 12), and Costco (Nasdaq: COST  ) (P/E: 26). That trio could tantalize the value investor or the growth investor; Sears probably attracts what could be known as the dead-retailer-walking investor.

Ultimately, the fact that Sears has staggered along this long doesn't mean it can continue to do so forever. One of the lessons from Borders' bankruptcy is that unhealthy companies can take a very long time to utter their last gasp, especially when they've got some big-name backing.

Speaking of which, Edward Lampert, the hedge fund manager who has long headed up Sears, referred to the quarterly results by stating, "We could do a lot better." No kidding. It's hard to imagine doing much worse. Coming initiatives like "the Kardashian Kollection" to "reinvent" clothing at Sears don't reverse my opinion that this is a money-losing stock idea. Sears also really shouldn't lower itself to reinventing the English language on the cue of a family that's famous because, well, does anybody actually know why? "Kollection"? That just adds insult to injury.

Investors should take a cue from consumers: Don't buy what Sears is selling. The stock's a stinker. If you like watching slow train wrecks, you can add Sears Holdings to your watchlist, or if you strongly disagree with my sentiments, let me know in the comment box below.

Best Buy, Costco, and Wal-Mart are Motley Fool Inside Value selections. Best Buy and Costco are Motley Fool Stock Advisor recommendations. Wal-Mart is a Motley Fool Global Gains pick and a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call position on Wal-Mart. The Fool owns shares of Best Buy, Costco, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. For more on this and other topics, check back at Fool.com, or follow her on Twitter: @AlyceLomax. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (10)

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.

  • Report this Comment On May 09, 2011, at 2:29 PM, stinkerno1 wrote:

    These guys are making more money by squeezing the stock than retail sales. There is no stock to borrow to short. These guys have probably locked it all up. Once the selling dies down they squeeze it upwards. Sooner or later they'll get caught. The real estate has lost tremendous value and is a huge carry loss and their stores have lost the access to middle America it once had. That cant be recovered.Reminds me of Winn Dixie before it went to bankruptcy. As long as he makes the money elsewhere and squeezing the stock Lampert hedge fund shareholders will be fine. Everybody else that is in it for the ride.. bye bye.

  • Report this Comment On May 09, 2011, at 11:18 PM, james27613 wrote:

    Only reason I shop there is for the DieHard battery.

    Had the gold model go bad after 30 months, I got it replaced at no cost, gold =36 Months replacement.

    Took me over 60 min to get it tested and for them to figure out they don't sell the GOLD series G58 anymore.

    Next time I'll get the battery from CarQuest.

    Store was in Raleigh NC Triangle Town Center.

  • Report this Comment On May 10, 2011, at 12:40 AM, rscolesII wrote:

    Craftsman tools sears auto motive and sears appliances have a loyal customer base and a great reputation. With proper leadership the company could turn around. Most likely it will slip away. I hope I am wrong unless, I decide to short sears.

  • Report this Comment On May 10, 2011, at 6:30 AM, kcpt64 wrote:

    Sears Holdings Formed (I think 2005), since then:

    NO investment in retail stores (some thrift stores have been putting more effort into the shopping experience than Sears Holdings), plus I can't remember the last time Sears or Kmart for that matter opened a NEW store (At least here in Kansas City), and

    Nothing is ever in stock, and

    Non-existent customer service

    = Train Wreck :o)

    They had one chance to turn it around after the merger and lost it, a shame in many ways,

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