Sears Holding Shares Down 11%, Hello $65 a Share

Sears Holdings

Sears Holdings Corp. (NASDAQ:SHLD) shares are back in the $65 range on heavy selling, volume is almost 5x the normal activity and we just made it to early afternoon trading.  Sears reported a loss of 17 cents per share (excluding items). The Street expected the company to report earnings of 38 cents per share.

Via on the numbers and the reaction from Wall Street -- One reason is that comparable-store sales dropped 8.6% (12.5% at Sears stores and 3.9% at Kmart). Another reason is what the company called "significant items," which include costs associated with store closings and severance (32 cents per share), domestic pension plan expenses (22 cents per share), mark-to-market losses on Sears Canada hedge transactions (8 cents per share), and a positive impact of a reversal of a $62-million reserve (29 cents per share). The store closings include charges that related to the decision to close 28 underperforming stores.

The company's interim CEO, W. Bruce Johnson, had this to say about the retailer's quarterly performance, "While the overall retail market remains difficult and its impact is reflected in our results, we continue to take actions to increase the efficiency of our operations. We have reduced our selling and administrative expenses by approximately $1 billion over the past four quarters, including a reduction of $212 million this quarter."

Yes, the market is difficult, but that didn't stop other retailers -- just like Limited Brands (NYSE: LTD) yesterday, or Wal-Mart (NYSE: WMT) before it -- from surprising the Street to the upside.

SHLD bulls should worry a bit today, as the stock is clinging to support at its 20-day moving average. If the stock slips today (as it rightly should), watch for this support to give way and for the shares to challenge potential support from their 50-day moving average. Perhaps the biggest danger is the loss of support from the equity's weekly trendlines.

SHLD is in the process of climbing back from its 2009 nadir, but this morning's news could bring a quick end to this progress. If the shares fall too far, they could lose critical support from their 10-, 20-, and 50-week moving averages. If this situation comes to fruition, the stock could be in for yet another struggle. Unfortunately for SHLD shareholders, they are becoming used to struggles -- as the stock spent most of 2008 in a free fall.


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