UPDATE (February 2012): In the last year, Sears (SHLD) stock price has dropped over 41% while the S&P 500 is up just over 1%. There are several niche retail stocks that have been up over 50% in this same time frame. Lululemon Athletica (LULU) is up 58% in the last year while Ulta Salon and Cosmetics (ULTA) is almost 90% higher. Some companies may be able to use the excuse that the economy is struggling but there are too many retail stocks at all time highs for Sears Holdings to make this excuse. Other retail stocks at all time highs include Dollar Tree (DLTR), Buffalo Wild Wings (BWLD) and LKQ Corp (LKQX).
Recently, Sears Holdings announced that a large same store sales drop during the holidays lead to a fourth quarter profit decline of 13%. Two areas that were hit hard were electronics and clothing. With competition heating up in the electronics industry Sears and KMart must adjust their strategy on TVs, computers and DVDs. This is an industry that once had little competition but with online retailers popping up every day it is becoming much harder to lure customers into stores.
Amazon.com is very close to an all time high as they currently have $18.8 billion in assets compared to Sears Holdings with $26.05 billion. It is very important to note that over the last several years Amazon has seen growth in assets as can be seen on this chart. While Amazon has seen steady growth Sears Holdings has seen a drop in assets from around $31 billion in 2005 to $26 billion today. When compared to Amazon we see that assets were around $2.5 billion in 2005 and around $19 billion today. This is something that investors are well aware of.
One way that Sears has been attempting to attract customer is through many seasonal sales and deals. Sears was one of the first retailers in 2010 to start “Early Black Friday Sales” but it seems to be the case that customers were reluctant to go out and spend this extra money. Many reports started that Cyber Monday was the biggest in history and a huge beneficiary of that was none other than Amazon.com.
With millions of people resorting to the Internet when it comes to shopping Sears Holdings is likely to adjust their strategy to offer many online sales and discount prices. This may be a complete change in their business model but if they want to see same store sales growth in the future accepting what Amazon.com has done could be a step forward in the right direction.
Many people shopping at Sears and other department stores are hoping to save as much money as possible. Remember that some shoppers can save quite a bit on healthcare costs by taking advantage of Medicaid options. Rather than assuming that you do not qualify it might be best to submit an application to your state. Each state is a little bit different so make sure to do plenty of research before finally hitting the submit button in 2012.
Author: Aaron Bates
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