Updated Research Report on Sears Holdings - Analyst Blog

On Jun 20, 2014, we issued an updated research report on Sears Holdings Corporation SHLD.

Sears Holdings is finding it increasingly difficult to stabilize as it continues to grapple with deteriorating top and bottom lines. The beleaguered retailer reported a huge loss for the first quarter of fiscal 2014 as it failed to attract customers despite providing huge discounts on merchandise. The company's first quarter adjusted loss widened to $2.24 per share against a loss of $1.36 in the year-ago comparable quarter.

Revenues declined 6.8% to $7,879 million compared with $8,452 million in the year-ago quarter. The persistent sluggish performance at its Sears Domestic and Kmart stores – owing to Wal-Mart and dollar stores' aggressive pricing and expansion strategies – are drags on the company's top-line results.

However, we commend Sears Holdings' efforts to improve its financial performance and liquidity position through various strategic measures. One such major initiative taken by the company is transforming its business model, which we believe will help in stabilizing its declining sales.

Sears Holding, which currently sells products through store-based networks, is looking for opportunities to transform its business to a member-centric model through its Shop Your Way program. As part of this remodeling initiative, the company is heavily investing in its Shop Your Way program while strategically reducing its store count and divesting its underperforming businesses.

Moreover, the company is focused on cost containment, inventory management and merchandise enhancement initiatives to inflate margins. The company's strategy of capitalizing on opportunities and returning to profitability through its simplified organizational structure and new operating model are also encouraging.

Sears Holdings currently has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked stocks worth investing in the retail industry include Conn's, Inc. CONN, V.F. Corporation VFC and Five Below, Inc. FIVE, each carrying a Zacks Rank #2 (Buy).

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