Please ensure Javascript is enabled for purposes of website accessibility

Why Sears Holding Corp. Stock Dropped Today

By Jeremy Bowman – May 26, 2017 at 12:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The department store chain gave back some of its gains after yesterday's earnings beat.

What happened

Shares of Sears Holding Corp. (SHLDQ) were giving back some gains today after the stock popped yesterday on better-than-expected earnings

Though there was no specific news driving the stock down today, the move seemed to be a signal that investors thought the stock was overbought yesterday. As of 10:52 a.m EDT, the stock was down 8%.

An assortment of ads for Sears products

Image source: Sears Holdings.

So what

Sears stock rallied 14% yesterday after the retailer reported first-quarter earnings -- the stock was up by as much as 33% at one point. The move seemed to be in part a short squeeze as bearish investors rushed to cover their bets.

For the first quarter, Sears reported a profit of $2.28 per share, but that was due to the sale of the Craftsman tools brand during the period. Adjusting for that, the retailer, which also owns Kmart, posted a loss of $2.15 per share, compared to a per-share loss of $1.86 a year earlier. Still, that result beat analyst expectations for a loss of $3.05. 

Comparable sales plunged 11.9% and overall revenue dropped 20.4% to $4.3 billion, a sign that the business continues to be troubled.

Now what

CEO Eddie Lampert expressed optimism about the business, saying, "While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing."

Despite that statement and the bottom-line beat, the overall financial picture continues to be bleak for the company, and eventual bankruptcy seems probable. Investors seem to be remembering that today as the stock plummets once again.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.