Can Sears Stock Rebound?

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With shares of Sears (NASDAQ:SHLD) trading around $36, is SHLD an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sears operates as a specialty retailer in the United States and Canada. The company’s Kmart segment operates stores that sell merchandise under Jaclyn Smith and Joe Boxer labels; and Sears brand products, such as Kenmore, Craftsman, and DieHard. This segment’s stores provide consumer electronics, seasonal merchandise, outdoor living, toys, lawn and garden equipment, food and consumables, and apparel; and operate in-store pharmacies. The company’s Sears Domestic segment operates stores that sell merchandise under the Kenmore, Craftsman, DieHard, Lands End, Covington, Apostrophe, and Canyon River Blues brand names. Its stores provide appliances, consumer electronics, tools, sporting goods, outdoor living, lawn and garden equipment, home fashion products, apparel, footwear, jewelry, accessories, health and beauty products, pantry goods, household products, and toys, as well as automotive services and products.

Sears forecast a fourth-quarter loss and reported declining sales during the crucial holiday period. The retailer said it expects a net loss of between $250 million and $360 million for the fourth quarter of fiscal 2014, compared to a net loss of $460 million a year earlier. Same-store sales dropped 5.7 percent in the quarter through Jan. 6 at Kmart, and 9.2 percent at U.S. Sears stores , resulting in a for a company-wide decline of 7.4 percent. Both brands reported weaker consumer electronic sales, while Sears domestic stores’ also reported lower tools and home appliance sales, while Kmart was stung by falling demand for grocery, household products and toys. In a blog post, CEO Eddie Lampert said the results “are not nearly what we want them to be.” He added that, “They also overshadow all of the work that’s being done by our associates, our vendors and the other businesses we work with, along with everyone who is developing better ways for us to serve our members.”

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