Why Sears Holdings Stock Will Continue to Drop

Sears Holdings stock has dropped another 10% in the last five trading sessions, after the company reported a 20% revenue decline in the latest quarter.

Shares of Sears Holdings Corp. (Nasdaq: SHLD) slid 3.7% intraday Thursday after posting dismal Q3 results. They rebounded nearly 5% on Friday, but are still down almost 17% in the last month.

The company, which also owns Kmart, recorded a net loss of $454 million, or $4.26 a share, last quarter. That compares with a $548 million loss in the same quarter a year ago.

Revenue came in at $5.8 billion. That was down from $7.2 billion a year earlier. Same-store sales fell by 7.5% at Kmart and 9.6% at Sears in the quarter.

Sears Holdings stock has come under pressure again as the retail chain's revenue continues to tank. And the stock looks like it will keep dropping now. The company has closed 11 Sears stores and 27 Kmart stores since the start of its fiscal year on Feb. 1, 2015. The company now has 1,687 stores in total: 735 are Sears stores and 952 are Kmart stores.

The Q3 results have dashed any hopes of a Sears Holdings stock turnaround...

Sears hasn't logged three straight quarters of profits since the period ended January 2008, according to FactSet data. The company was profitable in Q2 2015, thanks in large part to the spin-off of 235 properties into a real estate investment trust (REIT) created called Seritage Growth Properties (NYSE: SRG). In addition to the Seritage real estate deal, Sears also formed joint ventures that hold additional properties with three mall owners. Collectively, those deals raised $3 billion in proceeds.

But prior to Q2, Sears strung together 12 conservative quarters in the red. And things are only looking worse for Sears stock...

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Why Sears Holdings Stock Will Keep Falling

Sears has been struggling for years as competition from brick-and-mortar retailers like Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) increases. E-commerce goliath Amazon.com Inc. (Nasdaq: AMZN) has also emerged as a formidable rival.

Mounting concerns over financing have prompted many Sears vendors to require cash on delivery for goods. That's left store shelves bare and has scared away shoppers.

Lately, Sears has been touting its "Shop Your Way" member reward program in attempts to regain consumer traction. The free program gives customers access to coupons and awards points that can be used towards future orders. The program accounted for 75% of sales at Sears and Kmart in Q3. Still, it didn't meaningfully improve the company's balance sheet or the Sears Holdings stock price.

Performances at Sears and Kmart stores on the crucial Black Friday shopping day were also weak.

More than 151 million people in the United States shopped either in stores and/or online on Thanksgiving Day or Black Friday, according to the National Retail Federation's Thanksgiving Weekend Survey.

But many skipped shopping at Sears and Kmart even though both opened doors at 6 a.m. on Thanksgiving hoping to attract early bird shoppers.

According to reports from The Street, the two discount retailers were "alarmingly absent of traffic and overstaffed with clothing inventory" during several visits to various stores during the two crucial shopping days.

Sears Holding stock opened at $19.08 Friday. That means shares are down roughly 40% in 2015.

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