Some investors fled after Sears revealed that first-quarter same-store sales dropped 3.6% and warned that it expects a quarterly loss of $1.35 per share to $1.81 per share. Analysts had expected a first-quarter profit of $0.03 per share, so you can see why fleeing the stock looked like a darn good option.
There's been plenty of fretting about the future of Wal-Mart
Sears' pathetic first-quarter tidings show that it isn't wooing customer traffic from rivals, nor is it in much of a position to improve its outlook. Furthermore, Sears isn't even cheap. It's trading at 65 times earnings, and its PEG ratio is an absolutely mind-boggling 8.81.
Compare Sears to Wal-Mart (P/E: 12), Target
Ultimately, the fact that Sears has staggered along this long doesn't mean it can continue to do so forever. One of the lessons from Borders' bankruptcy is that unhealthy companies can take a very long time to utter their last gasp, especially when they've got some big-name backing.
Speaking of which, Edward Lampert, the hedge fund manager who has long headed up Sears, referred to the quarterly results by stating, "We could do a lot better." No kidding. It's hard to imagine doing much worse. Coming initiatives like "the Kardashian Kollection" to "reinvent" clothing at Sears don't reverse my opinion that this is a money-losing stock idea. Sears also really shouldn't lower itself to reinventing the English language on the cue of a family that's famous because, well, does anybody actually know why? "Kollection"? That just adds insult to injury.
Investors should take a cue from consumers: Don't buy what Sears is selling. The stock's a stinker. If you like watching slow train wrecks, you can add Sears Holdings to your watchlist, or if you strongly disagree with my sentiments, let me know in the comment box below.