Things are hard enough for retailers in the current cutthroat competitive environment. But for retailers that long ago lost their luster, the outlook can be downright hair-raising. Investors, put on your running shoes and get the heck away from Sears Holdings (Nasdaq: SHLD)!

Run away!
I recently recommended a similarly hasty retreat from shares of J.C. Penney (NYSE: JCP). It's difficult to restore the shine to a deeply tarnished brand, and both of these discount retailers face very steep competition from stronger-branded rivals such as Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Costco (Nasdaq: COST), and even dollar stores like Family Dollar (NYSE: FDO).

In Sears' latest quarterly results, its loss widened to a whopping $218 million, or $1.98 per share. Revenue fell 5%, suggesting that rivals are eating Sears' lunch. Same-store sales at the namesake Sears locations plunged by 8.2%, and the company's margins are deteriorating, too.

Why investors would pay 29 times next year's earnings for a retail stock so profoundly challenged is beyond me. The last time Sears increased its revenue was the fiscal year ended February 2007. Today, it groans under a debt-laden balance sheet, with $4 billion in obligations and a total debt-to-equity ratio of 48.2%. As its revenue weakness continues to grow, paying off debt becomes increasingly less manageable, creating a very real risk for shareholders.

It's hard to imagine Sears will emerge from this difficult retail environment any stronger than it already is. Indeed, for Sears, it could be all downhill from here.

Try these instead
Investors dead set on retail stocks should instead consider these two candidates. They seem a bit more defensive than Sears, and more importantly, they trade at even cheaper multiples:


Earnings Per Share (TTM)

Revenue Increase/Decrease (TTM)

Total Debt-to-Equity Ratio (TTM)

Cash Per Share

Big Lots (NYSE: BIG) $2.81 5.6% 0% $2.26
Buckle (NYSE: BKE) $2.71 5.3% 0% $2.65

Source: Capital IQ and Yahoo! Finance.

Both of these retailers start with a B, and both look like better bets than Sears. Big Lots is a deep-discount, closeout retailer, while Buckle sells trendy merchandise to teens. Still, both are solidly profitable, boast revenue increases over the last 12 months, and have cash on the balance sheet with no debt.

Even better, both bring to mind that most beautiful of B-words: "bargain." Big Lots trades at less than 10 times next year's earnings, while Buckle trades at 14 times forward earnings.

What do you think? Should investors run screaming from Sears? Do you have opinions on Big Lots or Buckle? Let us know in the comment boxes below.