Discount department store Sears Holdings (NASDAQ:SHLD) will report first-quarter results on Thursday. Somehow, rising same-store sales is not one of the results I'm expecting.

What analysts say:

  • Buy, sell, or waffle? It seems that none of the seven analysts covering the retailer is expecting that, either. Four of them rate Sears an underperform, which you can read as a sell, while three say hold. No one's calling it a buy.
  • Revenue. In fact, sales are expected to fall almost 3% to $11.4 billion, with analysts anticipating an 8% decline in same-store sales.
  • Earnings. Analysts are expecting profits to drop a stunning 86% to just $0.15 a share as the company feels the effects of loading up on inventory that it had to discount to unload.

What management says:
Chairman Eddie Lampert has split his divisions into autonomous units in an attempt to jump-start growth, but he's doing so at a cost. Rather than investing in its stores -- only $580 million out of $4.3 billion in capital was reallocated to the business -- Lampert is again resorting to financial gimmicks to get things going. Still, even Lampert admits that the near-$3 billion in share buybacks last year would have been better off deferred. The stock is almost 50% below the levels it was trading at last year.

Lampert acknowledges his company's difficulties and doesn't see a turnaround in consumer spending this year. The shift in the calendar put Easter into the first quarter, compared with last year, and the very first rebate checks were mailed out at the start of this month. Neither factor is expected to help improve Sears' results.

What management does:
Further, those higher inventory levels came as a result of management having anticipated bigger year-end sales that never materialized. And although he had promised he wouldn't chase unprofitable sales, Lampert had a number of markdown promotions to get rid of the bulked-up inventories.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
It has certainly been easy to be critical of Lampert's recent handling of Sears Holdings. While he seemed to possess the genius of Warren Buffett when he first merged Sears with Kmart, you still had to wonder how two failing businesses would come together to make a better whole. Even better-run discount operations like Target (NYSE:TGT) have had a difficult go of it, with its first-quarter net income falling 7.5%. Deep discounters like Wal-Mart (NYSE:WMT) have been gaining at the expense of Sears, which hasn't reported a single instance of rising same-store sales since merging with Kmart in 2005 after Kmart had emerged from bankruptcy.

Also, there's something to be said for Lampert's realization that it can still make money with a few core Sears brands like Diehard and Craftsman. But will the plan to expand its merchandising to competitors' stores end up eating away further at Sears' own retail establishments? Brands -- like Land's End and Restoration Hardware (NASDAQ:RSTO), if the company acquires it -- may be the answer.

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