Please ensure Javascript is enabled for purposes of website accessibility

Why Sears Holdings Stock Jumped Today

By Timothy Green - Feb 15, 2018 at 4:25PM

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

A surprise profit thanks to a one-time tax benefit overshadowed miserable fourth-quarter sales.

What happened

Shares of Sears Holdings Corp. (SHLDQ) surged 14% on Thursday after the beleaguered retailer reported preliminary fourth-quarter results. While comparable sales plummeted at both Sears and Kmart stores, a surprise profit due to a one-time tax benefit provided enough good news to push up the stock price.

So what

Sears expects fourth-quarter revenue of $4.4 billion, down from $6.1 billion in the prior-year period. Total comparable sales are expected to decline by 15.6%, with an 18.1% decline at Sears stores and a 12.2% decline at Kmart stores.

The exterior of a Sears store.

Image source: Sears Holdings.

Sears was able to improve its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) during the quarter despite the abysmal sales numbers. The company expects adjusted EBITDA between a loss of $10 million and a gain of $10 million, up from a loss of $61 million during the prior-year period.

Sears expects to report a net profit for the fourth quarter. Thanks to a one-time non-cash tax benefit of $445 million to $495 million related to the U.S. tax bill, the company expects to report net income of $140 million to $240 million. This number also includes an impairment charge related to the Sears trade name of between $50 million and $100 million. The company posted a net loss of $607 million in the fourth quarter of 2016.

Now what

"In order to remain a viable competitor in the face of a very challenging retail environment, Sears Holdings is working to transform to a less asset-intensive business model, with a store footprint and digital capabilities meeting consumer needs and preferences," reads Sears' filing with the SEC.

Shares of Sears Holdings are down 94% over the past three years. Comparable sales continue to crater, and all the cost-cutting in the world won't prevent the company from failing sooner or later. A one-time tax benefit may have boosted the bottom line, but it doesn't change anything.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sears Holdings Corporation Stock Quote
Sears Holdings Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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