Pale profits: On May 17, Sears actually pulled off a profitable quarter ... because the company sold some assets. In other words, Sears didn't show any signs that it remembers how to actually be a decent retailer (a very long-standing problem). Right now, it's kind of like Sears is selling its organs, which brings in money in the near term but is ultimately unsustainable.
Sears' comparable-store sales in all three of its units all decreased, and total revenue fell 2.8%. Without the asset sales, Sears generated a loss of $0.31 per share. One-time gains should fool no one into thinking Sears is really in much better shape than it was six months ago, or last year for that matter.
Retail identity crisis: It's hard to be as messed up as Sears when it comes to having little or no competitive advantage in a crowded retail landscape. J.C. Penney
The market for low-priced merchandise contains plenty of formidable (and in some cases, even desperate) competition. Target
Last but not least, Costco
Painful debt: One of the worst things about Sears is its unattractive balance sheet. It has just $777 million in cash at this point, and $3.23 billion in debt. Its total debt-to-equity ratio is 70%. Debt's particularly dangerous when a company is already on poor operational footing. Sears is expected to continue to report dwindling sales and losses for years to come.
Ask those who invested in Borders why such a situation could be a recipe for disaster.
Sears may have some assets to sell off, but lingering investors should simply sell off their Sears shares. It would take a miracle to truly turn Sears around, and miracles are in short supply these days.
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Alyce Lomax owns no shares of any of the companies mentioned. The Motley Fool owns shares of Costco and Best Buy. Motley Fool newsletter services have recommended buying shares of Costco and creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.