Sears Scorched on Q2 Guidance

NEW YORK – Shares of Sears Holdings lost 10% of their value Tuesday after the retailer issued a weak sales report and warned of second quarter earnings that could get only half of the way towards analysts’ consensus estimates.

The Hoffman Estates, Ill.-based operator of Sears and Kmart stores projected that earnings for the three months ending Aug. 4 will land between $1.06 and $1.32 a diluted share. The low figure is exactly half of the analysts’ average estimate of $2.12 a share.

The projection by Sears was based on same-store sales declines of 3.9% and 4.0% at the firm’s Kmart and Sears stores, respectively, during the first nine weeks of the current quarter. Kmart’s weakness was said to extend to “most categories” while Sears’ were attributed to general weakness “offset by increases in women’s apparel and footwear.”

Home appliances remained a particular weak spot, although the firm said the trend wasn’t quite as severe as it was during the first quarter.

Investors also were drawn to comments by Sears chief executive Aylwin Lewis which suggested that the company simply wasn’t keeping pace with the needs and desires of consumers.

“We are disappointed with our recent performance,” he said. “Although we believe our business has suffered from many of the same factors that have led other retailers to announce disappointing results and lowered expectations, our recent performance underscores our ongoing need to become more relevant to consumers while improving our discipline around expense management.”

The update sent Sears shares reeling, falling as low as $153.60 before ending Tuesday’s Nasdaq session at $154.21, down $17.20 or 10%.

“We expect the stock to come under pressure as skepticism of this retail turnaround mounts,” commented Goldman Sachs retail analyst Adrianne Shapira in a research note. “Given continued softness in the home sector, we would expect similar pressures at retailers with home exposure such as Macy’s, JC Penney, Kohl’s, Bed Bath & Beyond, Williams-Sonoma and Ethan Allen.”

The company’s board also authorized the repurchase of up to $1 billion of the company’s common stock, in addition to the $121 million that remain available under a previous buyback.